Regional lockdowns take a big toll on MFG demand

New Delhi: The country's manufacturing sector activity moved towards stabilisation in June, but business conditions continued to deteriorate amid regional lockdown extensions, a monthly survey said on Wednesday.

The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) stood at 47.2 in June, up from 30.8 in May. Despite the rise, the Indian manufacturing sector activity contracted for the third straight month in June.

In April, the index had slipped into contraction mode, after remaining in the growth territory for 32 consecutive months. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

"India's manufacturing sector moved towards stabilisation in June, with both output and new orders contracting at much softer rates than seen in April and May," said Eliot Kerr Economist at IHS Markit.

However, the recent spike in fresh coronavirus cases and the resulting lockdown extensions have seen demand continue to weaken, Kerr added.

In line with the continued deterioration in demand conditions, Indian goods producers recorded a further reduction in employment during June.

According to the survey, output and new orders fell further, but at slower rates than in April and May. Moreover, new export orders fell for the fourth month in a row."Although the rate of decline eased to the softest since March, it remained sharp overall. When explaining the reduction in demand, panellists often cited the coronavirus pandemic," the survey noted.

In India, the death toll due to Covid-19 rose to 17,400 and the number of infections rose to 5,85,493, according to the health ministry.

On the cost front, input prices faced by Indian manufacturers continued to fall; and amid falling cost burdens, manufacturers opted to continue cutting their average output prices.

Looking forward, firms remained positive towards the 12-month business, with sentiment strengthening to a four-month high. That said, the degree of optimism remained far weaker than the historical average amid fears of a prolonged economic downturn due to the coronavirus outbreak.

"Should case numbers continue rising at their current pace, further lockdown extensions may be imposed, which would likely derail a recovery in economic conditions and prolong the woes of those most severely affected by this crisis," Kerr said.