The pick-up in the manufacturing PMI comes after a month in which the Omicron-variant-led third COVID-19 wave dampened activity
The Indian manufacturing sector continued to expand in February, with the sector’s manufacturing Purchasing Managers’ Index (PMI) rising to 54.9 from 54 in January.
A reading above 50 indicates expansion in activity, while a sub-50 print is a sign of contraction.
According to IHS Markit, which released its PMI report on March 2, February saw “strong increases” in new work orders. Within new work, international demand rose at the quickest pace in three months, though the increase was moderate.
“Output and new orders expanded at stronger rates, while buying activity continued. At the same time, sustained increases in backlogs could lead to higher employment levels in the months ahead should capacity pressures continue,” said Shreeya Patel, an economist at IHS Markit.
Employment, however, fell in February, though at the softest pace in three months.
Patel added that the Indian manufacturing sector had “weathered the storm” of the Omicron-variant-led third wave.
While manufacturing activity improved in February, concerns about prices remain. Input price inflation cooled to a six-month low but it remained elevated, forcing manufacturers to pass on some of the cost burden to consumers.
“Despite expenses rising sharply, firms passed on only part of this burden to clients, suggesting pressure on profit margins,” Patel said.
Elevated inflation has been a concern, which has mounted after Russia’s invasion of Ukraine that pushed up global commodity prices, including those of crude oil.
While the government has taken supply-side related measures to ease inflationary pressures for certain items, Indians are facing the prospect of higher petrol and diesel prices once voting for state elections concludes next week.
Data released on February 28 showed India’s GDP growth slowed to 5.4 percent in October-December from 8.5 percent the previous quarter, well below what was expected by the central bank and economists alike.