India’s manufacturing sector growth slowed down considerably in May, as the second wave of Covid-19 impacted demand and order flow.
The PMI ranges between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month.
Accordingly, the headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) inched up to 50.8 (index reading) in May same as 55.5 in April.
The latest index reading pointed to a marginal improvement in business conditions that was the weakest in the current ten-month sequence of expansion.
“New orders, the largest sub-component of the headline figure, increased at a marginal pace that was the slowest since the current stretch of expansion started in August 2020. According to panel members, demand was suppressed by the Covid-19 crisis,” IHS Markit’s May PMI report said.
“Firms scaled up production volumes during May, but the pace of expansion was modest in the context of historical data. In fact, the rise was the weakest in the current ten-month period of growth. Anecdotal evidence indicated that the upturn was curbed by the escalation of the pandemic and difficulties in securing raw materials.”
Besides, May PMI report said that although new export orders increased at a softer rate, the upturn was solid and outpaced the long-run series trend.
“The Indian manufacturing sector is showing increasing signs of strain as the Covid-19 crisis intensifies. Key gauges of current sales, production and input buying weakened noticeably in May and pointed to the slowest rates of increase in ten months. In fact, all indices were down from April,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.
“Amid a lack of new work, goods producers reduced headcounts again, with the rate of job shedding quickening in May.”
According to IHS Markit’s Economics Associate Director, the detrimental impacts of the pandemic and associated restrictions seen in the manufacturing sector are considerably less severe than during the first lockdown when unprecedented contractions had been recorded.
“Growth projections were revised lower, as firms became more worried about the escalation of the pandemic and local restrictions.”
“The overall degree of optimism towards the year-ahead outlook for output was at a ten-month low, a factor which could hamper business investment and cause further job losses.”