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03 Mar 2015 |
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Asia Pacific Emerging Markets Research |
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India: February manufacturing PMI at a 5-month low
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In sharp contrast to the buoyancy
that is implicit in 1Q15’s manufacturing’s advance growth estimate
(which is pegged at 10.6% oya!) under the new GDP series (which has
been greeted with much skepticism) the manufacturing PMI declined
for a second successive month and, in fact, dipped sharply by 1.7
points to 51.2 – the lowest in five months.
Both output and new
orders fell very sharply (by 2.8 and 2.5 points respectively). The
good news is that the sharp drop in new export orders last month
was arrested and, in fact, new export orders ticked up slightly
(from 54.9 to 55.1). What this reveals, however, is that the
weakness in demand was mainly domestic. This is surprising given
the purchasing power lift that should have been provided by lower
food and oil prices. However, this has likely been more than offset
by the slump that the rural economy finds itself in and the
weakness in the capex cycle. As a consequence of all this, the new
orders/inventory ratio ticked declined to an 8 month low of 1.02
from 1.08 in January.
Input prices below 50
for the first time in 6 years
The disappointment on
the activity side, however, is likely to be offset by continuing
good news on prices. Input prices declined for the third
consecutive month and, and by a full point from 50.3 to 49.3, and
are now at the lowest level since March 2009.
Meanwhile output prices
also ticket down, albeit more modestly from 50.6 to 50.2 – the
lowest in 5 months.
Muted inflation
dynamics reinforce our belief there is some space for monetary
easing and we pencil in another 50 bps of easing in this cycle,
with the next cut of 25 bps at the scheduled April
7th review.
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(91-22)
6157-3386
J.P. Morgan
India Private Limited
(91-22)
6157-3387
J.P. Morgan
India Private Limited
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