Factory growth accelerates

PMI jumps to four-month high driven primarily by new orders and sharp rise in output
MUMBAI: India’s manufacturing activity in May grew at its fastest pace in four months driven primarily by new order flows and sharp increase in output, a private business survey showed on Monday.
The HSBC PMI stood at a four-month high of 52.6 in May compared to 51.3 in April, signalling a further improvement in business conditions. A reading above 50 indicates expansion in manufacturing while a reading below 50 indicates contraction.
The manufacturing output increased for the 19th consecutive month with sharpest growth seen in consumer durables and capital goods sector. However, a stagnant growth in hiring activity has raised doubt about the sustainability of manufacturing growth in the coming weeks. According to the survey, over 99 per cent of the panelists reported unchanged staffing levels.
“The outlook for the sector is, however, clouded by a stagnant job market as firms remain uncertain about the sustainability of the upturn,” said Pollyanna De Lima, economist at Markit. The finished goods inventories index rose to 52 in May from 50.5 in April reflecting stock building by firms to fulfill the pipeline of new orders.
Infra growth shrinks:
Infra sector (eight core industries) growth contracted for second month in a row in April at 0.4 per cent, which will put pressure on RBI to cut interest rates during monetary policy review on Tuesday. Coal and steel were only two sectors that saw some growth, while crude oil and natural gas recorded lower output in April.
Infra sector had seen a negative growth of 0.1 per cent in March. Eight core industries comprise nearly 38 per cent of the index of industrial production (IIP). “Growth in the crucial core industries has printed in on a disappointing note in the new fiscal. April marked the second month of contraction with continued weakness in the demand led industries of steel and cement,” said Deloitte, economist, Rishi Shah.
He said that while on one hand coal block allocation is resulting in encouraging growth numbers, on the other hand the slowdown in electricity growth has finally turned into contraction. “We would expect the situation to improve going forward and expect the core industries to pick up in the second half as infrastructural projects pick up,” he said.
( Source : dc correspondent )
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