Manufacturing growth slows in November: PMI

Manufacturing growth slows in November: PMI

Mumbai: India’s manufacturing activity expanded for the eighth straight month in November but at its weakest pace since March due to a slowdown in growth of output, new business and employment, a survey showed.

The HSBC Markit Purchasing Managers’ Index (PMI) , based on a survey of 500 companies, fell to 53 in November from 54.5 in October.

A reading above 50 means activity expanded during the month.

“While still consistent with a month-on-month expansion of the manufacturing sector, the headline PMI looks to be slowly slipping back," said Robert Prior-Wandesforde, senior Asian economist at HSBC.

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On Monday, the government said Asia’s third-largest economy grew at its fastest rate in 18 months in the September quarter, smashing expectations and adding pressure to bring forward a rate rise and cut stimulus spending as inflation mounts.

The economy grew a stronger than expected 7.9% in the past quarter from a year earlier, but growth was expected to slow this quarter when the impact of a weak monsoon would be seen on crops, giving the government room to keep pro-growth policies in place for the near term.

The November PMI index reading was the weakest since March, the last time the index was below 50, and down 2.8 points from the year’s high in May.

The drop was driven largely by slower growth in both new orders and output, Prior-Wandesforde said.

“This is disappointing and fits with the notion that the best of India’s industrial recovery is already behind us. In our view, year-on-year industrial production growth will level off over the next few months before dropping back somewhat in 2010 as the domestic inventory build subsides," he said.

The new orders index fell to 54.60, its weakest since March, from October’s 56.7.

“The ongoing strong rise in input prices looks increasingly to be feeding through into output prices, which showed their strongest rise since September last year," Prior-Wandesforde said.

“This will continue to be reflected in higher wholesale price inflation which we still expect to hit 8% by March next year," he added.

The headline index had been below 50 for five months through March 2009, hitting a trough of 44.4 in December 2008.