Manufacturing PMI at 47.9, records steepest contraction

Manufacturing PMI at 47.9, records steepest contraction

Context:

Manufacturing activity in July slowed to 47.9, the lowest level since February 2009, according to the Nikkei Manufacturing Purchasing Managers’ Index, due almost entirely to the introduction of Goods and services Tax on July 1.

Introduction:

• The reading was lower than the 59.9 noticed in June.
• A score above 50 implies an expansion of activity while one below 50 denotes a contraction.

Survey pointed out the following points:

• PMI survey data indicated that the introduction of goods and services tax (GST) weighted heavily on the Indian manufacturing industry in July.
• New orders and output decreased for the first time since the demonetization related downturn recorded in December last year, with rates of contraction the steepest since February 2009 in both cases.
• According to Indian manufacturers, highest tax rates sparked greater cost burdens in July.
• However, the pace at which input costs rose was moderate and much weaker than its long-run average.
• The report also found that the one year outlook for output remained positive in July due to company’s  expectation that greater clarity on GST would bolster growth.