Indian manufacturers see another sharp deterioration in business conditions: IHS Markit
Jun 01, 2020
New Delhi [India], June 1 : Amid the ongoing coronavirus lockdown, Indian manufacturers recorded another sharp deterioration in business conditions during May, according to the latest Purchasing Managers' Index (PMI) data.
Weaker demand drove output lower following April's record decline. Consequently, firms cut staff numbers at the quickest pace since data collection began over 15 years ago.
At 30.8 in May, the seasonally adjusted IHS Markit India Manufacturing PMI rose from 27.4 in April. The latest reading pointed to another substantial decline in the health of the Indian manufacturing sector, albeit one that was slightly softer than recorded in April.
In a sign of further demand weakness, new orders placed with goods producers continued to fall after April's record contraction. The rate of decline decelerated but was still the second-fastest since the series' inception in March 2005.
Panellists often mentioned prolonged closures at their clients when explaining the latest reduction in sales.
Weak demand from international markets added to the deteriorating sales trend, with new business from abroad plunging further in May. Anecdotal evidence suggested that global measures to stem the spread of COVID-19 continued to stifle exports.
Faced with a further deterioration in demand conditions, firms continued to cut back production midway through the second quarter. The reduction was slower than April's unprecedented decline but still severe overall.
Lower production requirements saw Indian manufacturers continue to reduce worker numbers in May. Moreover, the rate of workforce contraction accelerated to the fastest in the survey's history, eclipsing the previous record set in April.
Similarly, goods producers needed fewer physical inputs in May and subsequently pared back their purchasing activity. The pace of decline was softer than in April but remained historically marked.
"The further reduction in May highlights the challenges that businesses might face in the recovery from this crisis with demand remaining subdued while the longevity of the pandemic remains uncertain," said IHS Markit Economist Eliot Kerr.
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.
IHS Markit is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government.
