New Delhi: Factory activity extended at its quickest fastest pace in 17 months in July on improved orders, showed a widely-tracked HSBC purchasing managers’index (PMI).
Though, this also jacked up costs, which might reason the RBI to hold the policy rate in its evaluation next week. However, workers were laid off for the first time in 10 months, albeit moderately.
PMI was up at 53 points in July from 51.5 in June. Any reading above 50 points shows a development and one below it is contraction.
In line with the headline indicator, output too improved at the quickest rate in 17 months (since Feb, 2013) in July, marking a 9-month period of improved production, Markit Economics, which compiles PMI data, said.
Frederic Neumann, a Co-Head of Asian Economic Research at HSBC, said,”Finally, the manufacturing sector is starting to pick up steam. A flood of new orders from both domestic and external sources has led to a surge in activity.”
Frederic Neumann, a Co-Head of Asian Economic Research at HSBC, said,”Finally, the manufacturing sector is starting to pick up steam a flood of new orders from together domestic and external sources has led to a surge in activity.”
Amid the monitored sub-sectors, producers of intermediate goods scaled up production at the sharpest speed.
The July data confirmed reports of further improvements in requirement as new orders improved at an accelerated speed, increasing the current sequence of growth to 9 Months.
Sector figures indicated a marked increase of new work intakes in the intermediate goods category.
“Details within the survey show that all monitored categories witnessed an increase of result and order flows,” Neumann said.
However the methodology used in PMI & official index of industrial production (IIP) is quite different, the broad numbers are in synchronize with the trend. The IIP information for June and July are yet to come, but manufacturing did improve 2.5% & 4.8% in Apr and May, after contracting for the 2 past previous months. The 8 core industries sectors, which have a combined weight of 38 per cent in IIP, too increased to a 9-month great of 7.7 per cent in June signalling that IIP & manufacturing may see more recovery.
Similarly, new business from overseas increased for the 10th successive month in July. Panellists commented on powerful demand from key export customers. This indicates that trade numbers in July would also be effective after increasing in dual numbers for 2 consecutive months of May & June.
PMI findings are in range with latest information that came on the global front. The US economy increased 4 per cent in April-June, 2014 after contracting 2.1 per cent in January-March of the year.
However, workforce numbers were decreased for the first time since Sept 2013 in July. Though, the rate of job shedding was marginal. Nonetheless, decline in employment was seen by producers of consumer & intermediate goods, with only investment goods companies reporting job creation.
Concurrently, backlogs of work improved in July & a number of panel members cited problems with their power supply.
As a result of continually increasing demand & following production requirements, purchasing activity by manufacturers increased the fastest in July since Feb 2013. Input buying increased across each of the sub-sectors, with the most powerful increase registered by intermediate goods companies.
Higher costs paid for metals, plastic, textiles, packaging, food & energy led to a further marked increase in input costs in July. The rate of cost rising prices was the quickest since Feb.
Neumann cautioned, “The speed of the recovery has also raised price pressures, with input costs increasing steeply. This means that the RBI may not cheer as loudly as the rest of us.”
The RBI is slated to come out with its monetary review on Tuesday & widely predicted to hold its policy rate.
EPC WORLD NEWS BUREAU
The post Manufacturing PMI extended by 17-month high in July appeared first on EPC World.