Mixed signals: On data and the key industrial sectors
India needs to strengthen momentum in the key industrial sectors
Official data for the core sector as well as the Index of Industrial Production, to which it contributes more than 40% weight, however, suffer from the infirmity of coming with a lag of more than a month. Meanwhile, the private sector, survey-based HSBC India Manufacturing Purchasing Managers’ Index (PMI) for June suggests that activity at factories rebounded last month from May’s heatwave-hit three-month low. June’s PMI reading of 58.3 was 0.8 percentage points higher than May’s 57.5, and, according to HSBC India, “comfortably above its long-run average”. The survey also indicates that manufacturers stepped up output and buying to meet buoyant demand, and stepped up hiring to the fastest pace “seen in more than 19 years of data collection”. However, both the job creation and demand were also accompanied by an intensification of increases in staff expenses and material and transportation costs that led to manufacturing companies raising their selling charges by the greatest extent in more than two years. The inflationary trend, coupled with survey respondents’ overall confidence in future output sliding to a three-month low, signals the economy still faces speed bumps. Policymakers have a chance to use the upcoming Union Budget to make policy tweaks to help strengthen momentum in the key industrial sectors.
