Business conditions in India improve at strongest pace in 2018
Reflecting greater production requirements, firms were encouraged to engage in purchasing activity and raise their staffing levels.
On the price front, input cost inflation was the sharpest since July 2014, whilst output charges rose at a stronger pace.
Business confidence eased to the weakest since last October.
The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose from 51.2 in May to 53.1 in June.
This was consistent with the fastest improvement in the health of India’s manufacturing economy in 2018 so far.
Manufacturing production rose in June, thereby extending the period of expansion to 11 months.
Moreover, the rate of growth was sharp and the most pronounced since last December.
Panellists linked greater output to favourable demand conditions.
Output growth was reported across all market groups.
In tandem with the expansion in output, new business placed at manufacturers in June rose to the sharpest degree in 2018 so far.
There were reports that strong underlying demand supported new client wins.
New orders from overseas rose for the eighth consecutive month.
Moreover, the rate of expansion was solid and accelerated to the fastest since February.
Anecdotal evidence pointed to stronger demand from key international markets.
Amid stronger demand conditions, firms raised their staffing levels in June.
Although modest, job creation accelerated to the strongest in 2018 so far.
Jobs growth was evident across consumption, intermediate and investment goods.
Following a fractional decline in May, firms raised their purchasing activity at the end of the quarter.
Although modest, the pace of expansion quickened to the fastest since January.
Panellists commented on improvements in market demand.
As a result, post-production inventories held by manufacturing companies rose further in June, but only fractionally.
Input costs faced by Indian manufacturing companies rose in June, thereby stretching the period of inflation to 33 months.
Moreover, the latest rise was the sharpest since July 2014.
Panellists reported that steel and fuel were among the key items that increased in price.
Subsequently, firms raised their output charges at the fastest pace since February.
Despite strengthening demand conditions, business sentiment was at the weakest level seen since last October.
Optimistic projections for output reflected expectations that demand conditions will improve over the next 12 months, according to anecdotal evidence. ■