Mumbai: Indian manufacturing activity continued to remain feeble in June, dampened by a softer pace of expansion in new orders and a decline in export growth.
The ABN Amro Bank purchasing managers’ index (PMI) eased to a seasonally adjusted 53.2 in June from 53.4 in May. It was the second-lowest reading since the series began in April 2005, with the record low of 53.0 recorded in March this year.
The PMI, compiled by UK-based NTC research and sponsored by the Dutch Bank, tracks changes in manufacturing business conditions by polling 500 companies each month on output, new orders, employment and prices. A reading above 50.0 signals expansion while readings below 50.0 show contraction.
New order growth slowed, with the index declining to 55.8 in June from 56.2 in May. The output index eased to 54.6 in June from 54.9 in the previous month. The export orders index also fell, with growth of new export orders remaining substantially below that of domestic orders. The index declined to 51.5 in June from 51.7 in May.
But companies hired more employees in June to meet their production needs. The employment index rose to 50.8 in June from 50.5 in May, which was the highest in four months. The input price index fell to its lowest in the survey’s 27-month history, with the index at 52.4 in June, slightly lower than 52.5 in the previous month.
The PMI hit a peak of 59.3 in October 2006, but has been declining since then as the central bank took a raft of monetary steps to cool inflationary pressures in Asia’s third-biggest economy.
The central bank has raised its key lending rate five times in the past year and has increased banks’ cash reserve requirements three times since December. The next policy review is scheduled on 31 July.
On 29 June, Reserve Bank of India Governor Yaga Venugopal Reddy reiterated that the central bank’s aim is to contain inflation within 5% in the current fiscal year ending in March. Annual inflation, based on wholesale prices, fell more than expected to a 14-month low of 4.03% in mid-June.