Manufacturing activity accelerated at its slowest pace in seven months in March, thanks to a resurgence in Covid-19 cases that weighed on domestic demand and output. Firms cut jobs again, continuing with a year-long reduction spree. The Nikkei Manufacturing Purchasing Managers’ Index (PMI), compiled by IHS Markit, dropped to 55.4 in March from 57.5 in the previous month. Despite the fall, however, the PMI reading for March remained above the long-period average. It also remained over the 50-mark that separates growth from contraction for an eighth successive month.
Nevertheless, the rise in input buying was curtailed by an intensification of cost pressures. Although the rate of growth was still marked and outpaced its long-run average, it eased from February’s near-decade high. “With Covid-19 restrictions expanded and lockdown measures re-introduced in many states, Indian manufacturers look set to experience a challenging month in April,” said Pollyanna De Lima, economics associate director at IHS Markit.
The Centre last week asked states to try and control the rapid spread of the Covid-19 cases. Any stringent restriction, especially in or around important commercial centres like Mumbai, will weigh on factory activity in April as well.
Despite pressure on domestic demand, new export orders rose further in March, stretching the current sequence of growth to seven months. Here there was an acceleration in the rate of expansion. According to the PMI survey, the rate of input cost inflation was among the strongest seen over the past three years. But selling prices increased only moderately as “companies limited their adjustments to retain a competitive edge and boost sales”.
“Goods producers indicated that strengthening demand and the receipt of orders in bulk underpinned a further rise in overall sales. The upturn was the eighth in successive months and sharp, despite softening to a seven-month low,” IHS Markit said in a release.