The pace of factory output slows marginally in June

1 Jul 2022 , 01:19 PM

The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) fell in June to 53.9, the weakest pace of growth since last September, from 54.6 a month ago.

This is the manufacturing PMI’s 12th print of 50 or above in a row. A reading above 50 denotes increased activity, while a print below 50 suggests decreased activity.

Strong local and foreign customer demand helped the Indian manufacturing sector’s economic recovery continue in June, according to S&P Global. “However, despite significant pricing pressures, growth of overall sales and output slowed down.”

The June print was negatively impacted by softer gains in output, factory orders, inventories of purchases, and employment. Additionally, the expansion rates for industrial orders and output slowed to nine-month lows.

The pandemic-induced severe recession of the Indian economy a few years ago is now being reversed. The central bank forecasts that the economy will grow by 7.2% this fiscal year. The rupee has fallen to historic lows as a result of the global macroeconomic and financial market instability, which are a drag on the economy. Additionally, inflation is still above goal, which has caused the central bank to raise policy rates.

Inflation rates for purchase prices and output charges declined to three-month lows in June, according to S&P Global, although they are still above their corresponding long-run averages.

Higher input costs were reported by businesses, including those for chemicals, electronics, electricity, metals, and textiles, which they partially passed on to customers.

More than 4% of panelists predicted production increase in the coming year, while the vast majority predicted little or no change from current levels, bringing mood to a 27-month low.

According to Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, “there was a broad-based slowdown in growth across a number of measures, such as factory orders, production, exports, input buying, and employment as clients and businesses restrained spending amid elevated inflation.”

The most recent data indicate the first reduction in input lead times since the start of COVID-19, which is good news for supply chains. As a result, buy prices and production charges increased in June at rapid but slower rates, thus reducing the upward pressure on input costs. However, businesses continued to be particularly concerned about inflation, which was a major role in driving down business confidence to a 27-month low.