With easing of Covid restrictions, manufacturing sector has rebound in September as Purchasing Managers’ Index (PMI) rose to 53.7 in September from 52.3 in August. However, very little change was seen on the job front.

Manufacturing has a share of over 14 per cent in Gross Value Added (GVA) output and is considered as a source of job multiplier. PMI is one of the high frequency indicators showing how the economy is performing.

Economic research firm IHS Markit prepares this survey-based index and releases with a detailed report every month in advance of comparable official economic data. Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said: “Indian manufacturers lifted production to a greater extent in September as they geared up for improvements in demand and the replenishment of stocks. There was a substantial pick-up in intakes of new work, with some contribution from international markets.”

Diffusion index

Its PMI is based on responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The headline PMI is a weighted average of the following five indices: new orders (30 per cent), output (25 per cent), employment (20 per cent), suppliers’ delivery times (15 per cent) and stocks of purchases (10 per cent).

Index above 50 shows expansion while a figure below 50 indicates contraction. The firm said that latest India’s PMI for manufacturing highlighted a stronger expansion in overall business conditions across the sector. For the second quarter of fiscal year 2021-22, the PMI averaged 53.8, a sizeable improvement from 51.5 in the opening quarter. Consumer goods was the brightest spot in September, posting the highest PMI reading of the three monitored market groups amid substantial accelerations in growth of new orders and output.

Also read: Manufacturing PMI slipped to 52.3 in August

The firm also mentioned that where growth was reported, panel members cited favourable market conditions and improved sales volumes. Indeed, new work intakes continued to expand in September. The rate of increase was solid and quickened from August. Anecdotal evidence indicated that demand conditions improved in part due to relaxed Covid-19 restrictions. Some panellists also linked growth to new client wins and successful marketing.

According to De Lima, companies continued to purchase extra inputs in September, but not much had changed on the jobs front over the month. In some instances, survey participants indicated that government guidelines with regard to shift work prevented hiring. After subsiding in each of the previous two months, cost inflationary pressures intensified in September. “Strong demand for scarce products contributed to the increase in input costs, as did rising fuel and transportation rates. Only a small proportion of this additional cost burden was passed on to clients, however, as seen by a slower and only modest increase in factory gate charges,” she said.

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