PMI manufacturing at 13-month high

December 02
10:48 2017

Manufacturing activity grew at a 13-month high last month, due to cuts in goods and services tax (GST) rates and a pick-up in new orders, showed the Nikkei Purchasing Managers’ Index (PMI) survey.
PMI rose to 52.6 points in November, the highest pace since October 2016. It had stood at 50.3 in October, down from 51.2 points in September. A reading above 50 shows expansion and one below that shows a contraction.

There was pressure from input prices and this might have the Reserve Bank of India deciding not to take an accommodative stance in its monetary policy review next  week, said the report. This is for a fourth month in a row that the index has come above the 50 mark.
The data came a day after gross domestic product (GDP) numbers showed manufacturing growth having jumped from 1.2 per cent in the  first quarter of the current financial year to seven per cent in the second quarter. Reversing a five-quarter slide in GDP growth, the economy bounced back from a three-year low to expand by 6.3 per cent in July-September.
“Growth in output and new orders picked up the fastest since October 2016, reportedly supported by reductions in GST rates and stronger underlying demand conditions,” said Aashna Dodhia, economist at IHS Markit and author of the report.
The GST Council had cut rates on a little over 200 items with effect from November 15. As many as 176 items saw a cut to 18 per cent, from an earlier 28 per cent. Stronger factory production levels also translated into the fastest rate of employment creation since September 2012. Beside, export growth rose for the first time in three months, as foreign demand for Indian goods had improved. Officially, merchandise exports had contracted in October. As such, PMI showed November could post growth.
On the price front, input cost inflation quickened to the fastest pace since April. This, the report said, seemed to make it unlikelier for RBI to adopt an accommodative stance. However, companies were unable to fully pass on higher cost burdens to price-sensitive clients. Dodhia added that the current phase of expansion had led to a pick-up in business sentiment, as “growth momentum seems likely to continue over the near term”.

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