Nikkei Manufacturing PMI rises to 53.1 in June, the fastest growth in 2018; job creation accelerates too

Nikkei Manufacturing PMI rises to 53.1 in June, the fastest growth in 2018; job creation accelerates too

10th july 2018

The latest Nikkei India Manufacturing Purchasing Managers Index (PMI) survey brings plenty to cheer about. The PMI rose to 53.1 in June from 51.2 in May, consistent with the fastest improvement in the health of India’s manufacturing economy in the year so far.
This is the 11th consecutive month that the manufacturing PMI remained above the 50-point mark. A score above 50 means expansion, while a reading below 50 points toward contraction. According to the survey, the sector’s activity grew at the strongest pace since last December, supported by rise in domestic and export orders.
“India’s manufacturing economy closed the quarter on a solid footing against a backdrop of robust demand conditions, highlighted by the sharpest gains in output and new orders since last December,” said Aashna Dodhia, economist at IHS Markit, which compiles the survey, and author of the report. Furthermore, new orders from international markets rose for the eighth consecutive month, while the rate of expansion accelerated to the fastest pace since February.
There’s good news on the employment front, too. Reflecting stronger demand conditions, manufacturing firms were encouraged to engage in purchasing activity and raise their staffing levels. “On the jobs front, the latest survey data pointed to a healthy labour market, with job creation accelerating to the sharpest since December 2017,” said Dodhia. The report added that the jobs growth was evident across consumption, intermediate and investment goods.
However, input costs faced by Indian manufacturing companies rose in the month under review, thereby stretching the period of inflation to 33 months. “The RBI recently raised interest rates for the first time in four years to contain inflation and stabilise the rupee. However, input cost inflation quickened to the strongest since July 2014 in June, suggesting that the central bank could remain under pressure to tighten monetary policy,” Dodhia added.
To remind you, last month, the apex bank had upped its retail inflation projection by 0.30 per cent and kept the policy stance in the neutral zone, even as it hiked the key rate by 25 basis points to 6.25 per cent.
The report added that panellists had reported that steel and fuel were among the key items that increased in price. Subsequently, firms raised their output charges at the fastest pace since February.
According to The Hindu Business Line, this index is based on a survey conducted among purchasing executives in over 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.
Meanwhile, despite the strengthening demand conditions, the survey found that business confidence had eased to the weakest level since last October. According to Dodhia, the dip in optimism partly reflected concerns of a potential market slowdown in the year ahead. “Indeed, some of the key challenges to the 12-month outlook include tighter domestic monetary policy and persistently high inflation,” she added.
To conclude on an optimistic note, the report also said that demand conditions are likely to improve over the next year.
Source: BUSINESS TODAY