India's factory sector expanded at its slowest pace in more than two years in August as export orders shrank amid weakening global demand, a survey of manufacturers in Asia's third-largest economy showed. Still, India was one of the few countries to show growth.
Similar surveys released on Thursday showed manufacturing activity contracted in the euro zone, Britain and China, with PMI readings all below the 50 level that demarcates growth from contraction. The HSBC Markit India Manufacturing PMI fell to 52.6 in August, below expectations for 52.9 and July's reading of 53.6. It was the lowest reading for the PMI since March 2009, when it was below 50.
"The main driver of the weaker reading was a significant contraction in export orders, which are facing stiff global economic headwinds," said Leif Eskesen, chief economist for India & ASEAN at HSBC. Growth in new manufacturing orders in India slowed for the fifth consecutive month, while the export orders index fell to 45.0 in August from 49.2 previously, the second consecutive month it has contracted, the survey showed. Weakening global demand, rising prices and tighter monetary policy by the central bank have combined to crimp India's economic growth. Data this week showed the economy grew 7.7 percent in the three months to June from a year earlier, its slowest pace in six quarters.
India's manufacturing sector grew 7.2 percent in April-June from a year earlier, an improvement from the previous quarter but below the 10.6 percent growth clocked a year earlier, although the services sector continued to perform well and demand from rural consumers remains robust. India's economy, which grew 8.5 percent in the fiscal year that ended in March, is expected to slow significantly in the current fiscal year, with Morgan Stanley forecasting growth of 7.2 percent. Wholesale prices in India rose 9.22 percent in July after growth of 9.44 percent in the previous month.
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