India: Business conditions for both manufacturing and service companies improve in April
May 4, 2018
Business conditions improved in April, with both the services and manufacturing PMIs advancing further into expansionary territory. The composite Purchasing Manager’s Index (PMI), produced by Nikkei and IHS Market, rose to 51.9 in April from 50.8 in March. This was the highest reading since January 2018.
The manufacturing PMI recorded the first increase in four months in April, rising from 51.0 in March to 51.6. Consequently, the index placed further above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been since August 2017.
The improvement of conditions in the manufacturing sector in April came amid solid output growth. New orders rose for the sixth consecutive month in April, with manufacturers reporting stronger market demand helped them to secure new business. Also, after a reduction in March, outstanding work increased, although this was partly due to delayed payments causing a slowdown on the production lines. Meanwhile, improved demand conditions and increased output prompted further job creation in April. Moreover, manufacturers raised their purchasing activity for the sixth month in a row in April, while, in terms of inventories, pre-production stocks increased rapidly, and post-production stocks depleted quickly. On the price front, manufacturers continued to face input-cost inflation in April and, on the back of this, raised their selling prices for the ninth month in succession. Looking ahead, business sentiment for the coming 12 months remained in confident territory in April.
The Nikkei services PMI rose further above the 50-point threshold in April after crossing it in March. The index increased to 51.4 in April from 50.3 in March.
The continued upturn in the services sector was driven by increased orders in April. Moreover, outstanding business increased again in April. Amid this backdrop, firms raised their headcounts in the month, leading to the strongest job creation in over seven years. On the price front, inflationary pressures remained acute because of high raw material costs. On the back of this, service businesses raised their selling prices in April. Meanwhile, business sentiment regarding the coming 12-month period remained in confident territory in April.
Author: Edward Gardner, Economist