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India's manufacturing activity loses steam in October on GST bite

02 November, 2017, 01:06 | Author: Samuel Sharp
  • Urjit Patel and Arvind Subramanian

A private survey on Wednesday showed that the Nikkei Manufacturing Purchasing Managers' Index (PMI), compiled by IHS Markit, fell to 50.3 last month from September's 51.2 - its third month above the 50 mark that distinguishes growth from contraction, Reuters reported.

On the price front, manufacturing companies continued to face higher input costs, which rose at the fastest pace since May.

"The continued robust health of manufacturing and rising price pressures will help cement expectations of the Bank of England hiking interest rates for the first time in a decade".

The pace of United Kingdom manufacturing activity rose in October, making a positive start to the fourth-quarter industrial outlook, but price pressures remained as input costs continued to rise. A reading above 50 indicates expansion. Stocks of purchases rose only marginally, with the latest accumulation the weakest in the current 16-month sequence of increasing pre-production inventories. This marks the 15 consecutive month of growth for United Kingdom manufacturing and a welcome improvement on the previous month's performance. Input cost increases were passed on (at least in part) to clients, leading to the steepest increase in output charges for four months.


Central to the weak improvement in operating conditions was a much slower rise in manufacturing output. "There was further evidence of material shortage impacting the sector, leading to higher input costs and delivery delays", Andrew Harker, associate director at IHS Markit, said.

Dodhia said the recent recovery in the manufacturing sector lost impetus in October.

However, production rose at a solid clip thanks to an otherwise broad based expansion of sub-categories in the manufacturing sector including intermediate and investment goods producers. "Inflows of new orders stagnated as the negative effects arising from the implementation of GST continued to dampen demand". This was also reflected in the trend in vendor performance during September, as lead times lengthened to the greatest extent since April 2011.

United Kingdom manufacturing production rose at an identically solid pace to that registered in the prior survey month during October. "However, those manufacturers that were optimistic forecasted benefits of GST materialising over the next 12 months".

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