Factory output expands for 2nd straight mth

Source: The Hitavada      Date: 02 Mar 2017 09:38:26


Mar 1,


THE manufacturing sector grew for the second straight month in February, though growth rate remained “well below-par” and rising inflationary pressure pushed firms to hike prices for consumers, a monthly survey showed on Wednesday. The increase in prices, which was fastest in nearly three-and-half years and was triggered by higher raw material costs, also spoiled the case for any immediate interest rate cut by the Reserve Bank and supported the recent shift in its monetary policy stance from ‘accommodative’ to ‘neutral’.

The modest expansion in factory output was largely driven by a rebound in export demand and the job scenario turned sluggish and the business confidence among manufacturers was subdued, the survey showed.

The Nikkei Markit India Manufacturing Purchasing Managers' Index (PMI) -- a monthly indicator of manufacturing activity -- increased to 50.7 in February, up from 50.4 in January, as output and order books grew at a faster pace. A reading above 50 indicates expansion while any score below the mark means contraction.

February is the second straight month of expansion for the manufacturing sector after the demonetisation-induced contraction at the end of 2016.
“Indian manufacturers benefited from recovering demand and raised production volumes in response to another expansion in inflows of new work,” said Pollyanna De Lima, Economist at IHS Markit and author of the report.

On the prices front, the survey said input and output price inflation quickened in February.
“Of concern, higher commodity prices resulted in increased cost burden facing manufacturers. The sharp rate of inflation seen in February was most pronounced in 2-1/2 years and led factory charges to be raised at the quickest pace in 40 months,” Lima said.