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India’s manufacturing output shrinks in June

India’s manufacturing output shrinks in June

India’s manufacturing industry output fell in June, according to the IHS Markit Manufacturing Purchasing Managers’ Index (PMI). It declined to 48.1 in June from 50.8 in May, marking the first time since July 2020 that the index has fallen below the no-change mark of 50.

The PMI data also showed companies were at their least optimistic for almost a year and jobs continued to be shed for the fifteenth month in a row.

Coronavirus restrictions also reduced international demand for Indian goods, with new export orders decreasing for the first time in 10 months. The strict lockdown measures brought into place to contain the second wave of Covid-19 also hit demand and led to a fall in factory orders.

“Companies became increasingly worried about when the pandemic will end, which resulted in downward revisions to output growth projections. As a result of subdued optimism, jobs were shed again in June,” said Polyanna De Lima, Economics Associate Director at IHS Markit.

“Out of the three broad areas of the manufacturing sector monitored by the survey, capital goods was the worst-affected area in June. Output here declined at a steep rate due to a sharp fall in sales. The sector also saw the fastest contraction in buying levels,” she added.

“Falling new orders, business closures and the Covid-19 crisis triggered a reduction in output among Indian manufacturers. The decline was moderate relative to those seen in the first half of 2020, but ended a 10-month sequence of growth.”

De Lima added: “The intensification of the Covid-19 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. In all cases, however, rates of contraction were softer than during the first lockdown.”