Manufacturing activities fall in Feb; but firms upbeat on demand spike

India's manufacturing sector activities eased slightly in February but firms were upbeat as they responded to increased new work intakes by stepping up production and purchasing activities, a monthly survey said on Monday.

The seasonally-adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) fell marginally to 57.5 in February from 57.7 in January, indicating that even though the pace of growth eased from January it remained sharp in the context of historical data.

The headline figure for February remained above its long-run average of 53.6, the survey noted.

In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction.

"Indian goods producers reported a healthy inflow of new orders in February, a situation that underpinned a further upturn in output and quantity of purchases," Pollyanna De Lima, Economics associate director at IHS Markit, said.

Lima noted that production growth could have been stronger if firms had appropriate resources to handle their workloads.

"This was evident from a quicker rise in outstanding business and another decline in inventories of finished goods," Lima said.

However, employment decreased further amid COVID-19 restrictions related to shift work.

"However, many hope that such controls will shortly be removed as the vaccination programme widens.

"Once larger parts of the population are immunised against COVID-19 and restrictions start to be lifted, companies expect a gradual improvement in economic conditions which they hope will translate into output growth," Lima said.

Meanwhile, goods producers expect output to increase over the coming 12 months.

Optimistic growth projections reflected forecasts of an improvement in economic conditions and the lifting of restrictions as the vaccination programme expands, as per the survey.

"The upbeat mood supported the fastest increase in input buying for almost a decade as companies focused on rebuilding their input stocks to fulfil demand growth.

"February data showed the sharpest monthly rise in pre-production inventories in the survey history," Lima said.

On the prices front, the survey said strengthening demand for raw materials and semi-finished items exerted upward pressure on input cost inflation, which picked up to a 32-month high.

On the domestic macro-economic front, after contracting for two quarters in a row, the Indian economy recorded a 0.4 per cent growth in the October-December quarter, mainly due to a good show by farm, manufacturing, services and construction sectors.

Photograph: Amit Dave/Reuters