HSBC Purchasing Managers’ Index says output contracted in May due to weak order flows apart from persistent power outages

Mumbai : Manufacturing sector output fell in the month of May, its first decline since March 2009, as order flow weakened and power outages affected the sector, a survey said on Monday.

As per HSBC Purchasing Managers’ Index, economic activity in manufacturing sector continued to remain sluggish last month with output falling for the first time in about four years.

The index, an indicator measuring changes in output, new orders, employment, supplier delivery times and stocks of purchases, fell from 51.0 in April to 50.1 and hit a 50-month low.

Even though growth in new orders was the weakest in the current 50-month expansionary sequence, export orders expanded at its fastest pace since January.

“Economic activity in the manufacturing sector slowed further in May as output contracted in response to softer domestic orders. In addition, power outages hampered output and led to a jump in backlogs of work as businesses struggled to meet orders,” said Leif Eskesen, Chief Economist for India & ASEAN at HSBC. The rise in input costs was, nonetheless, slight and the slowest in the current 50-month inflationary period.

Meanwhile, unfinished business levels increased, amid evidence of power and water shortages. Backlogs of work rose “solidly” and at the quickest pace in five months, it said.

India’s economic growth rate slipped to a decade low of 5 % in 2012-13 on account of poor performance of farm, manufacturing and mining sectors.

“Inflation gauges also eased, and output prices even fell in sequential terms on the back of tougher competition and receding raw material prices. These numbers have heightened the probability that the RBI will fire another salvo at its June policy meeting,” Eskesen added.

A divergence was seen with regard to input and output prices. Whereas purchase prices rose, output charges were lower for the first time in four years.

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