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Manufacturing PMI dips to record low of 27.4 in April
The decline in operating conditions was partially driven by an unprecedented contraction in output. “Amid widespread business closures, demand conditions were severely hampered in April. New orders fell for the first time in two-and-a-half years”, a data analytics firm said.
India’s manufacturing activity plummeted to a record low in April as the coronavirus lockdown imposed by the government forced factories to shut down and consumers to stay indoors, a private survey showed.
The manufacturing Purchasing Managers’ Index (PMI) for India declined to 27.4 in April from 51.8 in March, recording the sharpest deterioration in business conditions since data analytics firm IHS Markit started collecting the data 15 years ago.
A figure of above 50 indicates expansion, while a sub-50 print signals contraction. The survey tracks new orders, output, jobs, suppliers’ delivery time, and stocks of purchases for around 400 manufacturers.
The decline in operating conditions was partially driven by an unprecedented contraction in output. “Amid widespread business closures, demand conditions were severely hampered in April. New orders fell for the first time in two-and-a-half years and at the sharpest rate in the survey’s history, far outpacing that seen during the global financial crisis,” IHS Markit said.
“In the latest survey period, record contractions in output, new orders and employment pointed to a severe deterioration in demand conditions. Meanwhile, there was evidence of unprecedented supply-side disruption, with input delivery times lengthening to the greatest extent since data collection began in March 2005,” said Eliot Kerr, an economist at IHS Markit.
New business orders received little support from international markets in April, as export orders tumbled. Deteriorating demand conditions saw manufacturers drastically cut their workforce in April. The reduction in employment was the fastest in the survey’s history.
The only silver lining was that the 12-month outlook for production recovered from its March lows, and was well above the 50 mark, though markedly lower than the long-term-average.
Pranjul Bhandari, chief India economist at HSBC, said with partial easing of the lockdown from Monday, she expects economic activity to pick up, led by postponed consumption and inventory restocking demand. “As such, the April reading is likely to mark the bottom of the PMI series. Yet, the recovery could be shallow and short-lived as we expect 50% of the economy will continue to be locked down as per the latest rules announced; several restrictions in ‘red zones’ will hamper backward and forward supply chains; and the large disruption in labour with many employees returning home to rural India may create manpower issues,” she added.
