Manufacturing barely manages growth in Oct, says PMI report

Urjit Patel and Arvind Subramanian

Manufacturing activity in October was more subdued than the level seen in the previous month due to a slowdown in new orders caused by the implementation of the Goods and Services Tax, according to a private sector survey.

United Kingdom manufacturing activity and input prices both increased more than expected in October, a survey revealed on Wednesday, which was felt likely to increase the Bank of England's confidence about raising interest rates and its concerns about inflation.

Output price inflation was also broadly unchanged from the end of the third quarter as charges rose for the second month running.

She noted that the downturn was mainly driven by falling domestic and overseas demand for Malaysian goods, with new orders and new export orders declining at the fastest rates since July 2017 and December 2016 respectively.

Any figure above 50 signals growth.

The Purchasing Managers' Index for firms came in at 56.3 in the month, up from 56 previously and higher than expectations among City of London analysts of a 55.8 reading.

"In response to weakening business conditions, the manufacturing sector decreased payroll numbers for the first time in four months, and at the greatest extent since August 2016".

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"We expect the Markit/CIPS Manufacturing PMI to post a slight monthly decline in October".

The manufacturing sector performed better in October than expected, further increasing the likelihood of the Bank of England raising interest rates on Thursday.

IHS Markit added that firms were restricted in their ability to pass on higher cost burdens to price-sensitive customers.

Finally, the level of positive sentiment among manufacturers towards output growth eased to the weakest since February.

Aashna Dodhia, Economist at IHS Markit and author of the report, said, "India's manufacturing companies struggled somewhat as the recent recovery enjoyed by the sector lost impetus in October".

Manufacturing production rose for the 14 month running in September.

However, the sterling exchange rate piled further price pressure on the industry, with input costs rising at their fastest pace in seven months and resulting in the steepest rate of selling price inflation since April. "However, those manufacturers that were optimistic forecasted benefits of GST materialising over the next 12 months".

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