Factory output expands, manufacturing PMI rises to 50.7 in February

NEW DELHI: A day after government data showed that the adverse impact of demonetisation on the economy was much lower than anticipated, two separate data releases on Wednesday indicated that companies and consumers are getting over any persisting cashcrunch concerns.

The Nikkei India Manufacturing Purchasing Managers’ Index ( PMI) rose to 50.7 in February from 50.4 in January, suggesting further improvement in manufacturing sentiment.

Meanwhile, domestic passenger vehicle sales rose 9.5% in February from the year ago, marking the second successive month of recovery after a 14.4% rise in January. A PMI reading in excess of 50 indicates expansion and contraction below that. The index had signalled manufacturing contraction in December, the first full month after the November 8 demonetisation announcement, with a reading of 49.6.



Data released on Tuesday showed the economy clocked 7% growth in the October-December quarter, confounding most experts who had pencilled in sharply lower growth due to the currency swap. For the full year, the economy is expected to report 7.1% growth, slower than 7.9% in FY16 but much better than the near-6.5% forecast by most independent experts.

“Indian manufacturers benefited from recovering demand and raised production volumes in response to another expansion in inflows of new work,” said Pollyanna De Lima, economist at IHS Markit and author of the PMI report. The BSE Sensex ended 0.84% up on the back of good numbers in two days. CARE Ratings has raised its GDP forecast for FY17 to 7.1-7.2% from 6.75% earlier while ICRA sees it growing 7.1% from 6.8% earlier.

The total volume of incoming new work increased for the second month in a row, whereas new export orders expanded for the first time since November 2016, PMI numbers showed.

Rates of growth for both production and order books picked up marginally since January.

On jobs front, the PMI survey showed a decline in manufacturing employment though the rate of job losses was marginal overall.

MARUTI SUZUKI LEADS
Sales of passenger vehicles had declined 1.36% to 227,824 units in December on account of the cash crunch post demonetisation.

There has been a strong rebound after that with lower interest rates and tax cuts in the Budget also contributing to demand.

The country’s largest car maker Maruti Suzuki continued to fare well, reporting an 11.5% rise in domestic sales to 120,599 units. Tata Motors reported a 12% rise while the second-biggest car maker Hyundai clocked a 4% rise.