Manufacturing PMI Hits 7-month Low

Manufacturing activity in India slowed to a seven month low in September as lower demand dampened output.
The Reserve Bank of India (RBI) cut its policy rate by a more than expected 0.5 percentage points to provide a demand stimulus to the economy. The Nikkei Manufacturing Purchasing Managers' Index declined to 51.2 in September from 52.3 in August.
A reading above 50 on this survey based index indicates expansion.
The tepid car sales in September seem to validate the lower reading.Market leader Maruti Suzuki reported 6.8% rise in sales in September. The official data has showed improving manufacturing in recent months. According to the Index of Industrial Production (IIP) numbers, manufacturing output rose 4.7% in July. The data for August will be released on October 12. India's GDP growth slowed to 7% in the quarter to June from 7.5% in the previous quarter. The government has already spent nearly 40% of its capital budget for the year by the end of August, hoping to restart the investment cycle.
The RBI has downgraded its growth estimate for the fiscal to 7.4% from 7.6%.
The PMI numbers suggest the second quarter was better than the previous one with an average of 52.1, marginally ahead of 51.8 for the April-June quarter. The new orders sub-index of the PMI dropped to a three month low. The sub-index for output fell to its lowest since May 2014.
The survey confirmed a subdued inflation outlook, validating the RBI's decision to cut rates.
The sub-index for input prices declined to its lowest since February 2009 because of lower commodity prices. Most manufacturers passed on these cuts to consumers.

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