Manufacturing PMI hits 8-year low on GST disruption

Reuters

This was signalled by the final IHS Markit Eurozone Manufacturing PMI® posting 56.6 in July, down from June's 74-month high of 57.4 and below the earlier flash estimate of 56.8.

Indian factory activity plunged last month and had its deepest contraction in more than nine years after Prime Minister Narendra Modi's new tax policy severely hurt output and demand, a survey showed on Tuesday.

The report also noted input price inflation linked to higher component costs and supplier shortages.

Raw material inventories eased just slightly in July, according to the survey, while imports were nearly steady and suggested stable domestic demand. It was the highest reading since April 2011. Companies' data should enforce confident in general expectations and to keep the economy on the right track towards stronger growth, while the key monthly decline would lead to uncertainty again.

The Nikkei India Manufacturing Purchasing Managers Index was at its lowest mark since February 2009 at 47.9 in July.

A reading above 50 indicates expansion, while a reading below 50 represents contraction.

The introduction of GST (Goods and Services Tax) seems to have weighed heavily on the Indian manufacturing sector in July.

"Operating conditions in the manufacturing sector improved further in July, suggesting the economy's growth momentum will be sustained", Zhengsheng Zhong, an economist at CEBM Group, said in a statement accompanying Tuesday's release.

The slower increase in new sales was matched by a similar trend in production and resulted in a slower employment growth during the month.

Better than expected data from the United Kingdom: the manufacturing sector is growing at a faster pace according to the manufacturing PMI: 55.1 points.

"Optimism was likely buoyed by the ongoing resurgence in the European economy, and will help boost investment spending going forward", Markit economist Alex Gill said.

On Monday, the CFLP manufacturing PMI touched 51.4, a trade below expected, but still in expansion, while 54.5 for the services PMI also was seen as stable. "New orders and output decreased for the first time since the demonetisation-related downturn recorded in December past year, with rates of contraction the steepest since February 2009 in both cases".

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