Coming as yet another factor that could induce the Reserve Bank of India to cut interest rates further, the manufacturing PMI fell to 52.3 points in August, down from a six-month high of 52.7 in July. This follows a poor showing in the Index of Eight Core Industries for the month.
“The PMI reading for the month of August dropped to 52.3 below the six month high of 52.7 seen in July. Importantly, the new orders index, new export orders index and the overall output index registered increases albeit at a slower pace than the previous month,” according to Mr Rishi Shah, Economist at Deloitte.
The Index of Eight Core Industries again saw a fall in its rate of growth, falling to 1.1 per cent in July compared to 3 per cent in the previous month, the third consecutive month of declining growth in the index.
With inflation in the consumer price index falling to an eight-month low and in the wholsale price index to a historic low, the expectation is that this will boost consumption in the coming months.
“Within the three monitored market groups in the output index, the consumer goods sector rose more than the capital and intermediate goods, possibly showing that consumption demand could pick up in the coming months as benefits from lower inflation materialise,” Mr Shah added.
However, the basic parameters of economic health do not provide a consistent view. While the PMI for July was at a six-month high, the core sector data for that month dropped significantly over the previous month, especially in the cement and steel sectors, both key in the manufacturing industry.
“The latest print also shows that there was a transmission of the decrease in input prices faced by the manufacturers to the output prices, aiding the case for some more easing of the monetary policy,” Mr Shah concluded.
