India's Manufacturing PMI rises to 52.5 in Feb, highest in a year

Higher demand from both domestic and export clients boosted order flows in February, an HSBC survey said.

March 04, 2014 7:38 IST | India Infoline News Service
The Indian manufacturing economy showed signs of strengthening in February, with faster increases in output and new orders bolstering the PMI to reach a one-year peak. New export business also rose at a quicker clip.

Up from 51.4 in the previous month to 52.5 in February, the headline HSBC India Purchasing Managers’ Index (PMI) signalled a solid and stronger improvement in business conditions across the country’s manufacturing sector.

Activity in the sector expanded for the fourth consecutive month in February. A PMI reading above 50 indicates growth while a lower reading means contraction.

“Manufacturing activity picked up further in February. New order flows have firmed, with the improvement in external demand and the reduction in macroeconomic uncertainty since last summer,” HSBC Chief Economist for India & ASEAN Leif Eskesen said.
Production growth accelerated on a stronger rise in incoming new work. The pace of output expansion was solid and the quickest in one year. Higher demand from both domestic and export clients boosted order flows in February.

Eskesen, however, noted that the recovery in manufacturing is still likely to prove “protracted” given the lingering structural constraints.

On inflation, the report said input costs rose during February and subsequently, average tariffs were raised further last month. The annual rate of inflation, based on the monthly wholesale price index, eased to a seven-month low of 5.05 per cent in January.

“Underlying inflation pressures remain potent, which was evident from the jump in the input price component of the PMI survey. This will keep RBI hawkish and likely compel it to raise rates a bit further this year,” Eskesen said.

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