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Business conditions improve in India

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Staff Writer | June 5, 2018
Latest survey data signalled a further, albeit weaker, improvement in Indian manufacturing conditions.
Indian manufacturing
India   Panellists commented on an improvement in demand conditions
This was reflected by weaker expansions in output and new orders and employment.

Inflationary pressures intensified with both input and output prices rising at the fastest pace since February.

Looking ahead, business optimism was weak by historical standards.

The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) fell from 51.6 in April to 51.2 in May.

The latest upturn signalled a marginal improvement in the health of the manufacturing sector.

Overall, the respective index registered above the neutral 50.0 threshold for the tenth consecutive month.

Manufacturing output rose in May, thereby marking a 10-month sequence of expansion.

Where an increase was reported, panellists commented on an improvement in demand conditions.

However, the rate of increase slowed to a modest pace.

Greater production in consumption and intermediate groups continued to outweigh a decline in investment goods.

In line with the trend for output, new orders placed at Indian manufacturing companies rose in May.

Panellists suggested that enhanced marketing initiatives supported new client wins.

As was the case with output, the latest upturn was modest.

Meanwhile, amid reports of greater demand from international markets, Indian manufacturers reported the strongest gain in new export orders since February.

Reflecting the trends observed in output and new orders, firms raised their staffing levels in May, albeit at a softer pace.

Greater production requirements were cited as the key reason behind the latest rise in employment.

Latest survey data indicated a back-to-back monthly rise in outstanding business during May.

Survey respondents linked this to delayed client payments and greater volumes of new business.

Purchasing activity declined for the first time in seven months in May, albeit only fractionally.

Meanwhile pre-production items held by Indian manufacturing companies rose at a slower pace.

Stocks of finished goods, on the other hand, declined further in May.

Despite easing from April’s survey record, the rate of contraction was sharp.

Indian manufacturing companies faced higher input costs in May, thereby stretching the current sequence of inflation to 32 months.

Panellists commented on higher prices for raw materials such as oil and steel.

Reflecting higher cost burdens, firms raised their selling prices in May.

Both input and output price inflation picked-up to the strongest since February.

Businesses remained confident towards the 12- month outlook for output in May.

An expected improvement in demand conditions boosted optimism, according to anecdotal evidence.

That said, the respective index remained below the historical average.