India’s manufacturing activity broke free from a 4-month long contraction in the aftermath of the coronavirus pandemic and subsequent nationwide and state lockdowns, to rise in August.
According to the monthly IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) survey released on Tuesday, manufacturing PMI stood at 52 in August, up from 46 in July. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction. PMI had fallen to a historic low of 27.4 in April, but had been steadily climbing since.
Output and new orders expanded at the fastest paces since February. Production growth was largely driven by greater client demand for goods following the resumption of business operations, according to firms. However, the decline in foreign exports weighed slightly on overall new orders as firms cited subdued demand conditions from abroad. Overall new business received by Indian manufacturers expanded at the fastest pace since February.
“August data highlighted positive developments in the health of the Indian manufacturing sector, signalling moves towards a recovery from the second quarter downturn. The pick-up in demand from domestic markets gave rise to upturns in production and input buying,” said Shreeya Patel, economist at IHS Markit. But Patel also warned that in August delivery times lengthened to another marked rate amid ongoing Covid-19 disruption, hinting at further speed bumps to growth in the upcoming months.
Meanwhile, employment continued to fall despite signs of capacity pressures, as firms struggled to find suitable workers, the survey showed. A nationwide lockdown in April, coupled with a crash in export orders, had led to conditions across sectors falling by the biggest margin ever and new businesses collapsing at a record pace. Since then, jobs have been hit the most and employment numbers saw a further slide in July.
But come August, manufacturers blamed the relocation of employees following the outbreak of the pandemic for the reduction in staffing numbers. The survey showed that pace of contraction in workforce numbers softened from that seen in July but remained strong overall.
Capacity restraints in employment drove the rise in incomplete work at Indian manufacturers midway through the third quarter. The rate of increase in backlogs was the fastest since December 2012.
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