Factory output rises slowest in 8 months

New Delhi India's manufacturing sector activity was largely flat in April, as rates of growth for new orders and output eased to eight-month lows amid the intensification of the Covid-19 crisis, a monthly survey said on Monday.

The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) was at 55.5 in April, little changed from March's reading of 55.4. In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction. "The PMI results for April showed a further slowdown in rates of growth for new orders and output, both of which eased to eight-month lows amid the intensification of the Covid-19 crisis," said Pollyanna De Lima, Economics Associate Director at IHS Markit.

Lima also noted that "the surge in Covid-19 cases could dampen demand further when firms' financials are already susceptible to the hurdle of rising global prices." The daily Covid-19 cases in India showed a slight dip with 3,68,147 new coronavirus infections being reported in a day, taking the total tally of cases to 1,99,25,604, according to the Union Health Ministry data updated on Monday.

"The headwinds facing manufacturers cannot be ignored, however. The surge in Covid-19 cases could dampen demand further when firms' financials are already susceptible to the hurdle of rising global prices," Lima said. On the prices front, survey participants also signalled a steep increase in input costs, the quickest since July 2014, and upward revisions to selling prices. "April saw the steepest increase in input costs for nearly seven years drive the sharpest upturn in output charges since October 2013. Data for the coming months will be important at verifying whether client demand is resilient to these challenges or if producers will have to further absorb cost burdens themselves to secure new work," Lima said.

The survey, however, noted that while output and sales increased at the slowest rates since last August due to an intensification of the Covid-19 crisis, there was a faster upturn in international orders. New export orders increased for the eighth consecutive month in April and at the fastest rate since October 2020. The rise was associated with a pick-up in international demand for Indian goods, the survey said. On the job front, although manufacturing employment continued to fall, the rate of contraction recorded in April was marginal and the weakest in the current 13-month sequence of job shedding, it noted.