India PMI: Manufacturing up at 52.9

The index has remained above 50,which divides growth and contraction,for over three and a half years.

Economic activity in the manufacturing sector picked up slightly thanks to firm new orders,said Leif Eskesen,an economist at HSBC,which sponsors the survey. Looking ahead,the recovery in manufacturing growth is likely to be slow.

The new orders sub-index,an indicator of future output,edged up to 54.9 last month from 54.4 in September while export orders grew for the second straight month albeit at a slightly slower pace.

Data released last month showed manufacturing rose 2.9 percent in August from a year earlier after contracting 0.4 percent in the previous month. Overall output at factories,mines and utilities rose an annual 2.7 percent.

PRICE PRESSURES EASE

Input and output price indexes fell to their lowest levels in more than two years. But Eskesen said this did not necessarily indicate India’s inflation,which rose to a 10- month high of 7.8 percent in September,would cool anytime soon.

Instead,Eskesen said inflation would remain elevated for a while yet,reflecting a Reuters poll which suggested prices will peak in the last three months of 2012 before slowing.

The central bank has maintained that high price pressures keep it from cutting interest rates in the face of slowing economic growth.

The Reserve Bank of India has held interest rates steady since April even as many other central banks cut rates.

It left rates on hold again on Tuesday but cut the cash reserve ratio for banks,which is expected to inject 175 billion rupees ($3.25 billion) into the banking system. Unusually,Governor Duvvuri Subbarao gave fairly explicit policy guidance,saying the central bank might ease policy in January to March,the final quarter of the fiscal year,when it expects inflation to ease.

The central bank is under pressure from the government and industry to cut rates to try to help revive economic growth,which has slipped to its weakest pace in almost three years.

India’s manufacturing growth improves in Oct: HSBC PMI

(PTI) India’s manufacturing sector inched up in October,driven by new orders,but persistent power shortages weighed on production,an HSBC survey said.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI) – a measure of factory production — stood at 52.9 in October slightly up from September,when it was 52.8.

The index has remained above the 50-mark,below which it indicates contraction,for more than three years now.

The October reading of HSBC PMI points to a further improvement in the health of the manufacturing sector,which witnessed the weakest growth rate in nine months in August.

However,going forward,the recovery in manufacturing growth is likely to be “slow”,HSBC said,adding that backlogs of work in the Indian manufacturing sector were accumulated at a sharp rate during October mainly due to persistent power shortages.

“Economic activity in the manufacturing sector picked up slightly thanks to firm new orders. However,insufficient power dampened output growth and led to an increase in outstanding work,” HSBC Chief Economist for India and ASEAN Leif Eskesen said.

On inflation,HSBC said it eased notably with both output and input prices rising at a slower pace in October but it is still likely to stay “elevated for a while”.

Input price inflation in the Indian goods-producing sector persisted in October and part of the burden of input cost inflation was passed on to clients as output prices were increased again. However,the rate of inflation was the slowest since November 2010,HSBC said.

Inflation as measured by all indices has remained elevated and Wholesale Price Index-based inflation has remained above the Reserve Bank’s comfort zone of 5 to 5.5 per cent for past 34 months now.

In the mid-year monetary policy review on October 30,RBI left the key interest rate unchanged but reduced cash reserve ratio by 0.25 per cent to infuse additional liquidity of up to Rs 17,500 crore into the system.

RBI kept the repo rate and reverse repo rate unchanged at 8 per cent and 7 per cent respectively.

Meanwhile,staffing levels at the manufacturing firms increased,marking an eight-month sequence of job creation. The payroll numbers were raised largely to support new orders growth,the HSBC survey said.

This is the second successive monthly expansion in new export orders and new orders increased for the forty-third consecutive month.