India: Private sector falls into contraction in September
October 4, 2019
The composite Purchasing Managers’ Index (PMI) produced by IHS Markit sank to 49.8 in September from 52.6 in August, marking the first time in 19 months that it landed below the 50-threshold that separates contraction from expansion in the private sector. Pollyanna de Lima, principal economist at IHS Markit, commented, “the bad news of a cooling manufacturing sector was compounded by an outright services downturn in September.”
The services PMI slumped to 48.7 in September from 52.4 in August, representing the lowest reading since February 2018, partly on a decrease in new orders logged in the month, after increasing for 18 consecutive months previously; despite the overall worsening of demand in September, external demand actually firmed up, with export orders increasing at a faster pace than in August. On the labor front, employment growth softened in September to the weakest rate since June. In terms of prices, input price inflation eased to the weakest rate in over two-and-a-half years in September, while output price inflation was little changed and continued to outpace that for input prices. Looking ahead, service-providing businesses continued to foresee output growth going forward, although optimism faded to a 31-month low.
On the manufacturing side, the PMI was unchanged in September at August’s 51.4, marking its joint-lowest reading since May 2018. Manufacturing output rose in September, but at a slower pace than in August. Moreover, although total sales rose again, the pace of increase moderated from August and was among the weakest in the current 23-month sequence of uninterrupted sales expansion. Meanwhile, new export orders increased only fractionally in September, while manufacturers scaled back input purchases for the second consecutive month in September, resulting in lower input stocks. Outstanding business marginally increased in September. In terms of prices, input price and output price inflation both moderated in September. Going forward, manufacturers had a less optimistic view of the operating outlook in September.
Author: Edward Gardner, Economist