Mumbai: The country’s manufacturing grew at the slowest pace in four months in January as weakening consumer demand in the US hurt exports of textiles and auto parts.
ABN Amro Bank NV’s purchasing managers’ index fell to 60.7 last month—the lowest level since September—from 61.9 in December, according to a report released on Friday. A reading above 50 indicates factory output gained.
Orders for merchandise exports, which make up about 15% of India’s $906 billion (Rs35.6 trillion) economy, have been “sliding” on the slowdown in the US, the nation’s biggest overseas market, ABN said. Manufacturing found support in domestic demand as jobs grew at the fastest pace in 25 months in January, the bank said.
“India’s trade will weaken considerably because of the economic turmoil in the US,” said D.H. Pai Panandiker, president at RPG Foundation, an economic policy group in New Delhi. “The economy is still relatively strong because local demand is rising.”
Manufacturing activity in China, the world’s fastest growing major economy, also cooled in January, according to two surveys of purchasing managers.
China’s overseas shipments grew at the slowest pace in two years in December, indicating recent yuan gains, cooling global expansion and cuts to some export tax incentives are beginning to bite.
Growth in exports, which account for 40% of India’s manufacturing, have slowed in the current fiscal year. The US accounts for about one-fifth of India’s shipments overseas.
Exports in the eight months ended 30 November rose 22% compared with 30% in the same period a year before.
The US economy grew 0.6% last quarter, less than economists’ forecast as housing sank deeper into recession and consumer spending cooled.
“External demand has been slowing while domestic demand remains strong in India,” said Gaurav Kapur, senior economist at ABN Amro in Mumbai. “Firms recruited additional staff in anticipation of further growth of new business.”