June 2021: Manufacturing activity contracts for first time in 11 months

Activity in the country’s manufacturing sector contracted for the first time in 11 months in June as the localised lockdowns against the backdrop of the second wave of Covid hurt demand.

Registering 48.1 in June, below May’s 50.8, the IHS Mar-kit India Manufacturing Purchasing Managers’ Index was below the critical no-change mark of 50 for the first time since July 2020.

The latest results highlighted renewed contractions in factory orders, production, exports and quantities of purchases. With business optimism fading over the month, job shedding continued, the survey results showed.

The PMI averaged 51.5 in the opening quarter of 2021-22, the lowest three-month figure since the same period one year ago.

Several economists, agencies and the RBI are of the view that impact of the second wave would be muted and confined to the first quarter of the current financial year, which ends in March 2022, with possibility of some spillover to July. Majority of them have reduced GDP growth projections from strong double-digit expansion projected earlier for 2021-22, citing the impact of the second Covid-19 wave. The survey is compiled from responses from questionnaires sent to purchasing managers of about 400 manufacturers.

“The intensification of the Covid crisis in India had a detrimental impact on the manufacturing economy. Growth of new orders, production, exports and input purchasing was interrupted in June as containment measures aimed at bringing the pandemic under control restrained demand,” said Pollyanna De Lima, economics associate director at IHS Markit.

No comments: