Manufacturing activity slows to 15-month low in August
The growth of eight core industries fell to 2.1 per cent in July and the country’s manufacturing sector activity declined to its 15-month low in August, due to slower increases in sales, output and employment. The eight core sector industries — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity — expanded by 7.3 per cent in July last year.
These core industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP). The fall in the core sector industries is fuelled by the drop in output of coal, crude oil, natural gas and refinery products, which recorded negative growth during the month under review.
Similarly, growth rate in production of steel, cement and electricity declined to 6.6 per cent, 7.9 per cent and 4.2 per cent, respectively, as against 6.9 per cent, 11.2 per cent and 6.7 per cent. The only silver lining was marginal rise in fertiliser output which grew by 1.5 per cent in July as against 1.3 per cent in July 2018.
The core sector growth has seen a continuous decline from April onward. In the April-July period, the eight sectors growth rate almost halved to 3 per cent as compared to 5.9 per cent in the same period last year.
The growth rate of these eight sectors slowed down to 5.2 per cent in April from 5.8 per cent. Then it came down to 4.3 per cent in May and 0.7 per cent in June. The GDP data too has shown deceleration with the growth rate coming down to over six year low of 5 per cent in the first quarter of the current fiscal, mainly on account of sharp dip in manufacturing sector, which registered almost a flat growth of 0.6 per cent.
Meanwhile, painting a grim picture of the manufacturing sector activity, the IHS Markit India Manufacturing Purchasing Managers’ Index (PMI), fell to 51.4 in August, its lowest mark since May 2018, from 52.5 in July, as most survey indicators fell since July to signal a widespread loss of momentum.
This is the 25th consecutive month that the manufacturing PMI has remained above the 50-point mark. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
“August saw an undesirable combination of slowing economic growth and greater cost inflationary pressures in the Indian manufacturing industry,” Pollyanna de Lima, Principal Economist at IHS Markit said, according to to news agency PTI. He added that most PMI indices moved lower, including key health-check measures for new orders, output and employment.
India’s economic growth has slumped for the fifth straight quarter to an over six-year low of 5 per cent in the three months ended June as consumer demand and private investment slowed amid deteriorating global environment.
In August, sales expanded at the slowest rate in 15 months, following which production growth and job creation were tamed. Moreover, factories lowered input buying for the first time since May 2018.
“Another worrying sign was the first drop in input buying in 15 months, which reflected a mixture of intentional reductions in stocks and shortages of available finance,” Lima said.
The survey noted that competitive pressures and challenging market conditions restricted the upturn. New orders from overseas also increased at a slower rate in August, with growth the weakest seen since April 2018.
