Factory output expands for first time since February; manufacturing PMI at 52 in August

Business & Economics

The manufacturing PMI stood at 52 in August, compared to 46 in July.

India’s manufacturing activity expanded for the first time in the last five months in August 2020, showing green shoots of economic revival in the second quarter. Customer demand, output, and new orders rose at the fastest pace since February. The manufacturing PMI stood at 52 in August, compared to 46 in July, said the IHS Markit report. The production growth was largely driven by greater client demand for Indian goods, following the resumption of business operations, the report added. The new business received by Indian manufacturers also expanded at the fastest pace since February. 

“August data highlighted positive developments in the health of the Indian manufacturing sector, signalling moves towards a recovery from the second quarter downturn. The pick-up in demand from domestic markets gave rise to upturns in production and input buying,” said Shreeya Patel, Economist at IHS Markit. However, delivery times lengthened to another marked rate amid ongoing COVID-19 disruption and employment continued to fall despite signs of capacity pressures, as firms struggled to find suitable workers, he added.

Also Read: India GDP shrinks 23.9% in Q1: First economic contraction in 40 years is worse than feared 

Despite an expansion in new orders, job shedding continued in the Indian manufacturing sector, extending the current sequence of decline to five months. The relocation of employees following the coronavirus was often linked to the reduction in staffing numbers. The pace of contraction in workforce numbers softened in comparison to July but remained strong overall. Capacity restraints in employment drove the rise in incomplete work at Indian manufacturers midway through the third quarter. Consequently, the rate of increase in backlogs was the fastest since December 2012. 

Meanwhile, amid the nationwide lockdown and standstill businesses, India’s economic activity nosedived in the first quarter of the current fiscal. After the manufacturing PMI rose beyond the level of 55 in January 2020, it nosedived to a record low in the month of April. 

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