New orders, faster output pull up April manufacturing PMI from 5-month low

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Growth in manufacturing picked up in April, raising hopes of quicker recovery for the sector from the doldrums of slow growth that had been recorded in March, showed the widely-tracked Nikkei purchasing managers’ index (PMI) on Wednesday.

The PMI rose to 51.6 in April from March's 51, which was a 5-month low. A reading above 50 shows expansion. Overall, manufacturing conditions improved for the ninth consecutive month in April, the PMI report said. Also, after lowering their payroll numbers for the first time in eight months back in March, firms managed to stimulate marginal job creation in April as idle capacity was used up.

Greater output in consumption and intermediate groups outweighed the decline in investment goods, the survey pointed out. Goods manufacturers raised their output for the ninth successive month in April even as the rate of rise gained pace.

On the other hand, the rise of new order growth and favourable demand conditions strengthened. New business rose for the sixth consecutive month. Although modest, the rate of expansion accelerated since March with firms saying reporting that stronger market demand led to greater client wins.

That said, the rate of growth eased to the weakest pace since November, 2017, reflecting the slowest gain in new export orders since November. New export orders rose during March, thereby marking a six-month period of growth. IHS Markit had earlier warned that further advances in trade disputes could potentially weigh on sales to international clients.

On the price side, Indian manufacturers faced higher input costs during April, thereby extending the current period of
inflation to just over two-and-a-half years. Although solid, input cost inflation moderated for the second month in a row to the weakest since last September. But, in a bid to survive in a tough market, firms raised their selling prices at the weakest rate in nine-months.

“Encouragingly, PMI data highlighted inflationary pressures moderated for the second month in a row, with input cost and output charge inflation at the weakest since September 2017 and July 2017 respectively." Aashna Dodhia, economist at IHS Markit and author of the report, said.

Finally, business sentiment was at the strongest level seen since the implementation of the Goods and Services Tax in July 2017. Optimism reflected expectations that new business and demand conditions will improve over the coming 12 months, according to firms.

Following a marginal decline in March, outstanding work rose during April due to delayed payments from clients, among other reasons.  As a result, pre-production stocks former rose at the fastest pace in 2018 so far, while inventories of
finished goods were depleted at the joint-fastest rate in the survey history. 

China, with which India is often compared, continued to hit roadblocks in its manufacturing performance in April. Growth in China’s factory sector slowed down in April as export orders dried up as a result of China's continuing trade war with the United States and Chinese firms cut output fearing industrial risks as a result of slower orders and high corporate debt.

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