Manufacturing PMI rises to 54.9 in February

Output and orders rise but job losses linger amid concerns over profit margins, IHS Markit survey finds

Output and orders rise but job losses linger amid concerns over profit margins, IHS Markit survey finds

India’s manufacturing sector saw output and orders expand in February, according to the IHS Markit Purchasing Managers’ Index (PMI), which rose to 54.9 for the month from 54 in January. A score of 50 on the PMI indicates no change in activity level.

February marks the eighth straight month of manufacturing growth, with the PMI remaining above the long-term average of 53.6. Favorable demand conditions pushed business optimism to the highest level since last October, but still below the long-term average.

Despite reviving demand and input price inflation slipping to a six-month low, employment in the industry fell, despite job cuts at the lowest level in three months.

The PMI, which is based on a survey of purchasing managers from 400 production units, is based on interviews conducted between February 10 and 22 and therefore does not take into account the impact of last week’s Russian invasion of Ukraine.

The surge in orders helped reduce finished goods inventories, but producers remained concerned about the threat to growth and profit margins, Shreeya Patel, an economist at IHS Markit, pointed out.

“Primarily, cost pressure remained high due to bottlenecks, while delivery times increased again. However, a central threat for the manufacturers comes from only marginal increases in sales prices. Although spending has risen sharply, firms have passed on only part of that burden to customers, indicating pressure on profit margins,” she said.

A sustained increase in backlogs could lead to higher employment levels in the coming months if capacity pressures persist, although the manufacturing sector appeared to have weathered the Omicron surge, Ms Patel said.

Although purchase price inflation has eased to a six-month low, IHS Markit said cost pressures remain strong. Some of this additional cost burden was passed on in the form of higher selling fees, albeit at a modest rate of increase.

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