India: Business conditions stabilize in March
Business conditions improved slightly in March, with the services PMI returning to expansionary territory and despite the manufacturing PMI pulling back to its weakest print since October. The composite Purchasing Manager’s Index (PMI), produced by Nikkei and IHS Market, increased to 50.8 in March from 49.7 in February.
The manufacturing PMI recorded a third consecutive decline in March, easing to 51.0 from 52.1 in February, and falling further from the five-year high of 54.7 recorded in December. Nevertheless, the index remains above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been since last August.
The headline figure moderated on the back of softer output and new order growth, with both sub-indexes logging their weakest prints since October and November, respectively. Slower manufacturing production growth led to the first reduction in employment in eight months, particularly in the consumer and intermediate goods sectors. Meanwhile, purchasing activity increased in March as firms raised inventories in response to new work orders. On the price front, input prices rose in March, but input inflation edged down from February’s upsurge. Similarly, output inflation eased from February in March.
On a more positive note, the Nikkei services PMI rose above the 50-point threshold in March after plunging below it in February. The index increased from 47.8 in February to 50.3 in March.
The upturn in the indicator was driven by stronger growth in new work and high business confidence. Participants in the survey noted an improvement in future expectations of market conditions and demand, with business sentiment hitting its highest print since the implementation of the Goods & Services Tax (GST) last July. Strong demand dynamics and mounting backlogs of work prompted service providers to expand their staffing levels at the quickest pace in nearly seven years. On the price front, inflationary pressures remained acute as a result of higher input costs for fuel, food items and gold. These cost burdens translated to higher prices for clients, although output price inflation eased overall.