India: The private sector expands at a slower pace in June
July 3, 2019
The composite Purchasing Managers’ Index (PMI) produced by Nikkei and IHS Market was down to 50.8 in June from 51.7 in May, representing an over one-year low. Consequently, the PMI fell closer to 50-point threshold that separates expansion from contraction in the private sector.
The services PMI tumbled for the fourth month running in June, decreasing to 49.6 from 50.2, and therefore slipped below the 50-point threshold for the first time since May 2018. The fall was largely due to stagnant sales, with only a fractional increase in new business reported. Firms pointed to competitive pressures and weak underlying demand as reasons for poor sales in June. Backlogs of work rose in June at the weakest pace so far this calendar year. With service companies feeling the slack, the increase in headcounts moderated to the slowest rate in 22 months. In terms of prices, input inflation accelerated from May’s 28-month low in June, but still remained subdued. Output inflation also accelerated a tad, but remained modest.
On the manufacturing side, the PMI dropped to 52.1 in June from 52.7 in May. The decrease indicated slower growth in the goods-producing sector and was primarily due to a weaker increase in output, which itself was negatively affected by a softer rise in new work intakes. Meanwhile, job creation slowed in June, while input buying rose to a four-month high. Suppliers were able to accommodate this increase in input buying, as evidenced by shorter delivery times. In terms of stocks, input stocks rose in June, while finished-goods inventories fell. Looking at prices, input costs rose at a modest pace in June, which helped firms offer discounts on goods. Overall, manufacturers remained upbeat about their sector’s growth prospects in June, although optimism moderated from May.
Author: Edward Gardner, Economist