India’s manufacturing output fell to four-month low in June; level of confidence at three-month low: Report

New Delhi, July 3 (KNN) India’s manufacturing activity slowed to a four month low in June despite an increase in orders from abroad, Nikkei India Manufacturing Purchasing Manager's Index (PMI) showed.

The Manufacturing PMI slowed to 50.9 in June from 51.6 in May as a softer rise in factory new orders resulted in weaker growth in production.

A reading above 50 on the index indicates expansion.

Output across India’s manufacturing economy rose for the sixth month in a row during June, which survey participants linked to ongoing increases in client demand. That said, challenging economic conditions, water shortages and the upcoming implementation of the goods & services tax (GST) reportedly hampered growth, said the report.

As was the case for new orders, production expanded in the consumer and capital goods categories, but fell at producers of intermediate goods.

Foreign demand for Indian-manufactured goods improved in June, with new export orders up at the quickest pace since October 2016. This followed a reduction in new work from abroad in May.

Input costs continued to increase, with anecdotal evidence pointing to higher prices for chemicals, food, plastics and rubber. However, the rate of inflation was modest and the weakest since August 2016. Likewise, output charges rose only slightly and at a below-trend pace.

Looking ahead, manufacturers in India forecast output growth in the coming 12 months, with optimism supported by new developments and anticipations of higher demand stemming from lower tax rates.

However, some companies mentioned that the implementation of the GST bill will have a negative impact on their businesses, added the PMI report.

Overall, the level of confidence fell to a three-month low.

Commenting on the Indian Manufacturing PMI survey data, Pollyanna De Lima, Economist at IHS Markit and author of the report, said, “In many cases, businesses indicated that growth was held back as a reflection of water scarcity and the impending introduction of GST.”

“Confidence towards future performance was mixed among goods producers. While the new tax system is anticipated by some firms to generate more business, others expect the GST to have a detrimental impact on their order books. As such, overall optimism slipped to a three-month low,” Lima commented.