Manufacturing sector growth constrained by Covid-19, surging costs: IHS Markit

New Delhi [India], Sep 1 : Growth of manufacturing production in India was curbed in August by the pandemic and rising input costs, according to the latest IHS Markit Manufacturing PMI released on Wednesday.
A softer upturn in sales led companies to pause their hiring efforts with business confidence dampened by concerns surrounding the damaging impact of Covid-19 on demand and firms' finances.
However, with order books still expanding and businesses retaining optimistic growth projections, stock-building efforts continued and additional materials were bought.
On the price front, a softer but still sharp rise in input costs underpinned a quicker increase in charges.
Registering 52.3 in August, the seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) pointed to an improvement in overall operating conditions for the second straight month.
The headline figure was down from 55.3 in July, indicating a softer rate of growth that was subdued in the context of historical survey data.
Manufacturing production increased for the second straight month in August amid reports of improved sales and demand. However, growth was curbed by the pandemic and elevated price pressures.
The overall rate of expansion was modest and below its long-run average. New orders also rose for the second straight month, and at a softer pace.
Some firms suggested that favourable market conditions and fruitful advertising boosted demand for their goods. Others noted that sales fell due to the pandemic.
August data pointed to back-to-back increases in new export orders, but here too growth lost momentum. The pace of expansion was only marginal.
Indian manufacturers signalled another monthly rise in cost burdens, thereby taking the current stretch of inflation to 13 months. The rate of increase softened, but remained elevated by historical standards.
Cost pressures were linked by survey members to raw material scarcity and transportation problems. Manufactures passed part of the additional cost burden on to clients by lifting their fees.
The rate of inflation quickened to a three-month high, but was below that seen for input costs.
Pollyanna De Lima, Economics Associate Director at IHS Markit, said charges levied by manufacturers rose as some firms shared part of their additional cost burdens with clients, although to a lesser degree than selling prices.
Input prices increased sharply, due to strong competition for scarce raw materials and transportation issues.
"Uncertainty regarding growth prospects, spare capacity and efforts to keep a lid on expenses led to a hiring freeze in August, following the first upturn in employment for 16 months in July," she said.
The IHS Markit India Manufacturing PMI is compiled from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size based on contributions to GDP.
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