IHS Markit India recently reported the Manufacturing PMI at 54.5 in February, which is held close to January’s eight-year high of 55.3. This signalled another robust improvement in the operating conditions across the sector, as firms reacted positively to new business gains and favourable market conditions. Growth was led by consumer goods makers, followed closely by intermediate goods producers. The strong manufacturing sector expansion seen in India, at the start of the year, was maintained in February, with rates of growth for factory orders, exports and output holding close to January's recent highs. The report said, while firms were willing to step- up the input buying, hiring activity increased only fractionally.
Aggregate new orders increased sharply in February, with growth little-changed from January's recent high. Firms that reported higher sales commented on successful marketing campaigns, strengthening demand and supportive economic conditions. February data showed that exports contributed to the expansion in total sales. There was a notable rise in new orders from abroad at consumer goods producer sectors and modest gains in the intermediate and capital goods sectors. Although manufacturers expect further increases in demand to support output growth in the year ahead, the degree of optimism weakened from January was below its long-run average. Survey members were particularly worried about the negative impacts of the coronavirus epidemic on exports and supply chains.
The solid expansion in input buying was maintained in February. Anecdotal evidence suggested that quantities of purchases have increased due to a combination of robust sales growth and higher production needs. In turn, stocks of purchases continued to expand in February, with the pace of accumulation, the quickest in close to three-and-a-half years. Conversely, holdings of finished goods have declined as firms reportedly used their inventories to meet the sales requirements. The rate of stock depletion remained sharp. Finally, February data pointed to a general lack of pressure on the capacity of manufacturers and their suppliers, with vendor performance and backlogs increasing only fractionally.