India: Private sector PMI hits record low in April
The composite Purchasing Managers’ Index (PMI) produced by IHS Markit slumped to 7.2 in April from 50.6 in March, marking the lowest reading since current records began in December 2005. A reading below 50 indicates a decrease in business activity since the previous month. April’s result comes after the government ordered a national lockdown at the end of March to reduce the spread of coronavirus.
Joe Hayes, economist at IHS Markit, reflected: “Historical comparisons with GDP data suggest that India’s economy contracted at an annual rate of 15% in April. It is clear that the economic damage of the Covid-19 pandemic has so far been deep and far-reaching in India, but the hope is that the economy has endured the worst and things will begin to improve as lockdown measures are gradually lifted.”
The services PMI fell to 5.4 in April from 49.3 in March due to unprecedented falls in output and demand; approximately 97% of the PMI survey respondents said output at their businesses fell in April. International sales notably dried up, with the respective sub-index falling to 0.0. As a result of order cancellations, including of backlogged orders, spare capacity of businesses rose at the fastest pace on record. On the employment front, headcounts fell at an unprecedented pace, although 90% of survey respondents said they were not making changes to staffing levels. Turning to prices, both input and output prices fell steeply, while, regarding the outlook, sentiment for the coming 12 months sank to an over four-year low.
On the manufacturing side, the PMI dropped to 27.4 in April from 51.8 in March, the lowest reading on record. Commenting on this, Eliot Kerr, economist at IHS Markit, said: “In the latest survey period, record contractions in output, new orders and employment pointed to a severe deterioration in demand conditions. Meanwhile, there was evidence of unprecedented supply-side disruption, with input delivery times lengthening to the greatest extent since data collection began in March 2005.” On the price front, both input and output prices were sharply discounted in April from March, while, business confidence for the next 12 months ticked up slightly on hopes of demand rebounding once lockdown measures ease.