Revival signs in manufacturing, core sector data

Tags: News

April figures indicate industry rebound, PMI expands in May

Macro-economic data is finally showing signs of good times.

Eight core sector industries, accounting for nearly 40 per cent of factory output, showed marked improvement in April, clocking 4.2 per cent growth against 2.5 per cent in the previous month.

The HSBC purchasing managers’ index showed manufacturing too expanded in May, another sign that things were looking up.

The core sector outcome was boosted by a double-digit growth in electricity output, as was the case in February, official data showed on Monday. That growth may slow down post June as hydropower generation will likely dip due to base effect and also because of below-par monsoon rain due to an El Nino event.

Icra senior economist Aditi Nayar said overall factory output in April would be below 1 per cent despite the pickup in core sector growth. The IIP numbers will be released on June 12.

The HSBC PMI, compiled by Markit, edged up to 51.4 in May from 51.3 in April. A reading above 50 indicates monthly expansion. But input prices rose at their slowest rate in more than a year.

The new orders sub-index, which includes domestic demand as well as orders from abroad, rose to 53.2 in May, a three-month high, from 52.5. A rise in the new orders index is often followed by better output in the following months.

“The momentum in the manufacturing sector improved at the margin, thanks to higher domestic and export order flows,” said Frederic Neumann, co-head of Asian economic research at HSBC.

Manufacturing output, which accounts for about 16 per cent of the overall economy, has been languishing for sometime. The PMI sub-index for output has fallen around 7 percentage points compared with two years ago.

The latest PMI data also showed that the economy, growing at less than 5 per cent on an annual basis, was still grappling with an inflation challenge.

The Icra economist said sentiments had improved dramatically since the strong election verdict, but a sustained and broad-based improvement in manufacturing was still some months away.

“Mining sector growth will take a cue from the resolution of issues related to land acquisition, clearances, renewal of leases and ramping up of evacuation facilities,” Nayar said.

Among the eight core sector industries, production of electricity increased 11.2 per cent in April, fertiliser 11.1 per cent, cement 6.7 per cent and coal 3.3 per cent, all at a faster pace than a year earlier.

Steel production grew slower at 3.1 per cent compared with a 10.1 per cent expansion in the same month last year. Output of crude oil, natural gas and petroleum refinery products contracted 0.1 per cent, 7.7 per cent and 2.2 per cent, respectively.

Indian companies also hired more staff in May.

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