Friday, May 04, 2012: 03:54:05 PM

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Orders pick up in manufacturing: PMI

According to the latest HSBC PMI data, the order books are piling up with new orders in the Indian manufacturing industry

The Markit compiled HSBC India Manufacturing Purchasing Managers Index (PMI) posted a figure of 54.9 in April 2012, which is a slight increase from the 54.7 in March. The figure is indicative that pace is picking up in the domestic manufacturing sector, albeit slowly. This growth is driven mostly by a pick up in consumer demand and good quality products, which has spurred new business opportunities in the Indian manufacturing industry during the month of April.

 
The rate of expansion observed in April was faster than March and sizeable. Growth in new orders for export was also observed. However, even though manufacturing output increased, the rate of expansion was found to have faltered slightly, appearing to be the weakest in 2012 this far. Although a rise in new orders encouraged a rise in output, power cuts had withheld manufacturing companies from completing production faster.
 
Commenting on the India Manufacturing PMI survey, Leif Eskesen, chief economist for India and ASEAN at HSBC, said, “Activity in the manufacturing sector expanded at a slightly faster pace in April. While output growth moderated, partly on the back of power outages, new orders continued to pour in, including for exports. Moreover, capacity remains tight, with backlogs of work still increasing, and inflation accelerated with both output and input prices rising faster. This suggests that upside risks to inflation remain and that RBI's rate cut could turn out to have been premature and too aggressive.”
 
Inflation, interest impacting cost
 
The rate of cost inflation accelerated for the second month running in April and was the sharpest since August 2011. In this context, Sudhanshu Chakraborty, proprietor of Sandeep Enterprise, a Kolkata based railway equipment part manufacturer said, “Cost of input material is still high. Coupled with that, high taxes have dealt a major blow to manufacturers.”
 
The rate of growth in input buying slowed to the weakest in 4 months in the manufacturing industry, with respondents indicating high prices for raw materials. The higher raw material costs and tax increases were passed on to their clients.
 
Priyanka Roy Chowdhury
 

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