India's manufacturing activity slipped in May as the second wave of coronavirus pandemic and lockdowns imposed by states hit industrial activity, with manufacturing PMI falling to 50.8.
Manufacturing Purchasing Managers' Index (PMI) stood at 55.5 in April, as per data released by IHS Markit on Tuesday. A reading above 50 indicates expansion, while a figure below 50 shows contraction.
"Although the health of the Indian manufacturing sector continued to improve in May, the latest results showed a significant loss of growth momentum. Due to the intensification of the COVID-19 crisis and its detrimental impact on demand, companies observed the slowest rises in new work and output for ten months," IHS Markit said.
There was also a substantial slowdown in growth of input purchasing and another round of job shedding. Concerns surrounding the pandemic restricted business confidence towards the year-ahead outlook for production, it said.
New orders increased at a marginal pace which was the slowest since the current stretch of expansion started in August 2020.
Anecdotal evidence indicated that the upturn was curbed by the escalation of the pandemic and difficulties in securing raw materials. Although new export orders also increased at a softer rate, the upturn was solid and outpaced the long-run series trend, it said.
"COVID-19 restrictions and a lack of new work led companies to reduce their payroll numbers further. The decline in employment was slight, but accelerated from April," it added.
Amid demand concerns, input holdings saw a slight rise, while post-production inventories witnessed a "solid contraction".
"... the detrimental impacts of the pandemic and associated restrictions seen in the manufacturing sector are considerably less severe than during the first lockdown when unprecedented contractions had been recorded," IHS Markit Economics Associate Director Pollyanna De Lima said.
The overall degree of optimism towards the year-ahead outlook for output was at a 10-month low, a factor which could hamper business investment and cause further job losses, Lima added.
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