Manufacturing PMI: Factory activity expanded more slowly, the manufacturing PMI fell to 54 in March from 54.9 in February

India’s factory activity expanded more slowly in March as rising prices meant new orders and output grew at the weakest rate since September, according to a survey released on Monday, which also showed optimism at a two-year low.

The survey provides the latest evidence that the recovery in Asia’s third largest economy is slowing. Oil price hikes, largely driven by uncertainties surrounding the Russia-Ukraine war, have already weighed on consumer spending – the biggest contributor to GDP growth.

The manufacturing purchasing managers’ index, compiled by S&P Global, fell to 54.0 in March from 54.9 in February. However, it stayed above the 50 mark, which separates growth from contraction, for nine straight months.

Despite this decline, the sector posted its best full-year result since FY2011/12.

“Manufacturing growth in India moderated towards the end of fiscal 2021/22, with companies reporting weaker growth in orders and production,” noted Pollyanna De Lima, economics associate director at S&P Global.

“The deceleration has been accompanied by an intensification of inflationary pressures, although the rate of increase in input costs has remained below the rate observed towards the end of 2021.”

Sub-indices that track new orders and manufacturing were at six-month lows and external demand contracted for the first time since June 2021, pointing to a weaker recovery in the global economy and a slowdown in China.

But the factories increased employee numbers for the first time in four months.

Still, rising cost pressures remained a key concern as companies faced accelerating input price increases over the past month, forcing them to shift some of the burden onto consumers. Producer prices rose at their fastest rate in five months.

“Right now, demand has been strong enough to withstand price increases, but if inflation continues to pick up steam, we could see a more significant slowdown, if not an outright drop, in sales,” De Lima added. “Companies themselves appeared very concerned about pricing pressures, which were a key factor pushing business confidence to a two-year low.”

Like other major economies, India is experiencing a sustained rise in inflation due to heightened supply disruptions and a rise in oil prices – the largest component of the country’s imports. Manufacturing PMI: Factory activity expanded more slowly, the manufacturing PMI fell to 54 in March from 54.9 in February

Russell Falcon

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