Manufacturing PMI rises in March as new orders pick up

Manufacturing activities in the country rose in March compared to the previous month on the back of output growth and increase in new orders, but was lower than January, showed a widely-tracked HSBC purchasing managers’ index (PMI). 

Ahead of the Reserve Bank of India (RBI) monetary review next week, the PMI survey showed that inflation has risen both on the input and output sides. 

Firms have not been hiring additional workers for 14 months now and this time rising costs have deterred them from doing so. 

PMI rose to 52.1 points in March from 51.2 in February. A reading above 50 shows expansion and one below this score implies contraction. PMI had stood at 52.9 points in January. 

Manufacturing output increased for the 17th consecutive month in March and faster than in February, said Markit Economics, which compiles PMI data. 

The latest increase in production was broad-based by sector with growth signaled by consumer, intermediate and investment goods companies.

Pollyanna De Lima, an economist at Markit said,”Momentum is building in manufacturing as the sector begins to build up ahead of steam. Stronger expansions of output, new orders and stocks of purchases all contributed to a higher PMI reading in March.”

Even then, staffing levels have barely changed over the past 14 months. Relief is that hiring did not decline in March, unlike February.

De Lima said this is a signal that hesitation still prevails among firms to hire additional workers. 

Underpinning the expansion in output was a quicker rise in new order flows. According to survey participants, demand conditions improved. 

Continuing the trend that started in October 2013, new export orders increased in March. Although solid, the overall growth rate moderated to the weakest in ten months.

PMI data does not match with official figures since India’s merchandise exports fell for both–January and February– in 2015. Also, core sector data, that gives advance indicator to the industrial production numbers, fell to the 17-month low of 1.4 per cent in March. 

However, Markit Economics survey said there was evidence of ongoing pressure on the capacity of manufacturers’ operations, as unfinished business increased for the 32nd consecutive month. 

Furthermore, the rate of accumulation quickened since February. 

March saw a return of inflationary pressures across India’s manufacturing economy. After falling in the prior month, purchase costs rose at a marked rate that was the most pronounced since August 2014. 

According to panelists, chemicals, metals, plastics, energy and paper had all risen in price. Output charge inflation quickened to the strongest in four months, as firms attempted to sustain profit margins by raising their tariffs