Factory activity slows as Covid worry drags

Manufacturing activity expanded for the second straight month in August, but the pace of growth remained muted as demand showed signs of weakness due to the pandemic’s impact, a survey showed.

Data released by analytics firm IHS Markit showed the purchasing managers’ index (PMI) for the manufacturing sector declined to 52.3 in August from 55.3 a month earlier but stayed above the 50-level, separating expansion in activity from contraction. PMI is compiled based on responses from purchasing managers of around 400 manufacturers. In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction.

IHS Markit said that despite the expansion, the headline figure indicated a softer rate of growth. Growth was curbed by the pandemic and elevated price pressures, it said.

Some companies suggested that favourable market conditions and fruitful advertising boosted demand for their goods, the statement said.

Others noted that sales fell due to the pandemic. August data pointed to back-to-back increases in new export orders, but here too, growth lost momentum, the statement said.

Indian manufacturers also signalled a rise in cost burden.

Pollyanna De Lima, economics associate director at IHS Markit, said August saw a continuation of the Indian manufacturing sector recovery, but growth lost momentum as demand showed some signs of weakness due to the pandemic.

“Yet, factory orders and output rose across the consumer, intermediate and investment goods categories,” said Lima.

“The 12-month outlook for production remained positive, though confidence faded amid worries concerning the lasting scars of the pandemic and the adverse impact of rising costs on companies’ finances parallel to a lack of pricing power. Input prices increased sharply due to strong competition for scarce raw materials and transportation issues,” Lima said.

Uncertainty regarding growth prospects, spare capacity and efforts to keep a lid on expenses led to a hiring freeze in August, following the first upturn in employment for 16 months in July, the statement said.