Manufacturing PMI falls to 3-month low of 51.7 in August from 52.3 in July

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Manufacturing growth eased for the second consecutive month in August, mainly on account of slower gains in output and decline in fresh orders, the widely tracked Nikkei purchasing managers' index (PMI) showed.

The numbers are in contrast to the strong manufacturing growth (13.1 per cent) in the first quarter (April to June, or Q1) of 2018-19 (FY19).

The index fell to 51.7 in August from 52.3 in July, as operating conditions improved at the slowest pace since May.

The PMI data suggested domestic demand conditions improved at a slower pace than the preceding month.

In GDP data, the domestic demand, as denoted by the private final consumption expenditure, rose at 8.6 per cent in Q1FY19, up from 6.7 per cent in Q4FY18.

If PMI is any indicator of things to come, manufacturing might slow down even in the GDP data for Q2FY19 as the low base effect wanes.

"High global oil prices, a tight monetary policy and capital outflows from emerging markets are some of the headwinds," said Aashna Dodhia, economist at IHS Markit and author of the report.

Job creation remained subdued in August though slightly higher than the previous month.

This is the 13th consecutive month that the manufacturing PMI remained above the 50-point mark. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

"The August data signalled a further loss of growth momentum across India's manufacturing sector, reflecting slower gains in output and new orders," said Dodhia.

The PMI data suggested domestic demand conditions improved at a slower pace than the preceding month, while new export orders rose at the fastest pace since February.

In response to sustained periods of expansion in output and new orders, firms were encouraged to raise their staffing levels during August.

On the price front, Indian manufacturing companies continued to face higher input costs during August. There were reports that currency weakness contributed to higher raw material costs.

As part of their efforts to protect margins, Indian manufacturers raised their own selling prices for the 13th consecutive month in August, but the rise was marginal and the slowest since April.

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