India: The private sector expands at a slower pace in April
May 6, 2019
The composite Purchasing Managers’ Index (PMI) produced by Nikkei and IHS Market moderated to 51.7 in April from 52.7 in March, shifting closer to the 50-point threshold that separates expansion from contraction in the private sector.
The services PMI decreased to 51.0 in April from 52.0 in March, which marks the weakest growth in the services sector since last September. The moderation was partially due to slower increases in output and new business orders, with both growth rates falling back to lows last seen in September and weighed on by uncertainty leading up to the general elections. On the operational front, employment rose in April at a faster pace than March, input price inflation moderated to the second-slowest rate in almost two years, and output inflation remained subdued. In terms of the next 12 months, business confidence among service providers rose in April to the highest in seven months, supported by predictions that economic conditions will improve after the elections.
On the manufacturing side, the PMI declined to 51.8 in April from 52.6 in March. This represents the slowest expansion in the manufacturing sector since last August. The primary reason behind this moderation was a softer increase in new business orders, which Pollyanna de Lima, principal economist at IHS Markit, said “created a domino effect” and restricted output growth, employment gains, input purchases and business sentiment. New business orders partly grew at a slower pace in April due to disruptions arising from the elections.
Commenting on price developments in the private sector and what they might mean for monetary policy at the Reserve Bank of India, Pollyanna de Lima said a “key takeaway from the latest results is the lack of inflationary pressures in both the manufacturing and service sectors, which coupled with slower economy growth offers room for a further cut to the benchmark repurchase rate.”
Author: Edward Gardner, Economist