India’s manufacturing sector contracts in June; First time in 11 months: Survey
India’s manufacturing sector activities contracted for the first time in 11 months in June, as a rise in coronavirus cases and strict containment measures adversely impacted demand as well as job losses, a monthly survey on July 1 said. .
The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) declined to 48.1 in June from 50.8 in May.
The index fell below the crucial 50.0 mark for the first time since July 2020. In PMI parlance, a print above 50 indicates expansion while a score below 50 indicates contraction.
The latest readings highlighted a renewed contraction in the volumes of factory orders, production, exports and purchases. Besides, job losses continued during the month, with business optimism, the survey said.
The COVID-19 restrictions also dented international demand for Indian goods and led to a drop in new export orders for the first time in ten months.
“The intensity of the COVID-19 crisis in India had a detrimental effect on the manufacturing economy. Growth of new orders, production, exports and input purchases was disrupted in June as containment measures aimed at bringing the pandemic under control were put in place,” said Pollyanna de Lima, associate director of economics at IHS Markit.
However, Ms Lima said the rate of contraction in all cases was softer than it was during the first lockdown.
Business confidence was undermined in June by uncertainty about when the pandemic could be brought under control. The companies were at least optimistic for almost a year. “As a result of dim optimism, jobs were lost again in June,” Ms. Lima said.
On the price front, input costs rose further in June, with firms reporting higher prices for chemicals, electronic components, energy, metals and plastics.
The survey noted that the additional cost burden was again shifted to customers, with goods producers increasing their fees for the tenth straight month.
“Out of the three broad sectors of the manufacturing sector monitored by the survey, capital goods was the most affected sector in June. The sharp drop in sales has resulted in a sharp drop in production here.
“This sector also saw the sharpest contraction in buying levels and only job losses were on the way,” Ms. Lima said.
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