Indian factory output slowed slightly in August after jumping to a 17-month high the previous month, but growth remained strong, a key HSBC survey showed on Monday (Sep 1). The positive data came three days after new figures showed India’s economy grew by a higher-than-expected 5.7 percent in the first financial quarter, its best pace since early 2012.
The British banking giant said its Purchasing Managers’ Index (PMI), which measures factory production, eased to 52.4 points from 53.0 the previous month. The July figure had marked its best level since February 2013. In the survey, keenly watched as a harbinger of industrial expansion and economic health, a reading of more than 50 points suggests expansion while anything below indicates contraction.
“Momentum in the manufacturing sector eased in August following a sharp upswing in July. Despite the slowdown, growth remains robust relative to trend,” said the report. It noted an improvement in operating conditions in August “as solid output growth was supported by strong expansions in total new orders and business from abroad”.
Consumer goods were the prime driver of growth in August, while capital goods, a key indicator of economic activity, lagged behind. Business confidence has been building that Prime Minister Narendra Modi’s right-wing government, which took power in May, will initiate policy changes to propel growth and emulate China’s economic ascent, despite a budget last month that eschewed radical reforms.
But the economy still faces the risk of resurgent inflation, the HSBC survey suggested. “Price pressures remained elevated, despite the slight deceleration seen in input prices. This is likely to keep the central bank guarded against inflation risks, particularly from the pick-up in demand,” said Frederic Neumann, HSBC Asian economic research co-head.
Source : Channel News Asia | September 1, 2014