Manufacturing slows in August as new orders shrink

India’s manufacturing activity moderated in August following a softer rise in output and new orders, with global oil prices and monetary policy tightening hitting sentiment, a private business survey showed on Monday.

The Nikkei India Manufacturing Purchasing Managers’ Index declined to 51.7 in August from 52.3 in July.

A reading of over 50 on this survey-based index indicates expansion; below that is contraction.


“August data signalled a further loss of growth momentum across India’s manufacturing sector, reflecting slower gains in output and new orders,” said Aashna Dodhia, an economist at IHS Markit and the author of the report.

The index is based on a survey conducted among purchasing executives in more than 400 companies, which are divided into eight broad categories: basic metals, chemicals & plastics, electrical & optical, food & drink, mechanical engineering, textiles & clothing, timber & paper and transport.

Official data released on Friday showed that India's economy expanded 8.2% in the April-June quarter, the fastest in more than two years. The manufacturing sector grew a robust 13.5%, according to national accounts.

The PMI data suggest some loss of momentum. Operating conditions improved at the slowest pace since May, mainly reflecting slower gains in output and new orders, the survey said.

However, foreign demand rose at the fastest pace since February as exports possibly gained competitive edge from a depreciating rupee.

Indian manufacturing companies retained optimistic projections for output in the next 12 month, but the level of sentiment eased from July’s three-month high and remained below the historical average.

On the price front, manufacturing companies continued to face higher input costs during August, the survey said, as it pointed to reports that currency weakness contributed to higher raw material costs.

“As part of ongoing efforts to protect margins, Indian manufacturers raised their own selling prices for the thirteenth consecutive month in August. That said, the latest rise was marginal and the slowest since April,” the report said.