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India's April factory activity growth picks up slightly, prices soar

05/03/2021 | 01:23am EDT
FILE PHOTO: Workers stitch garments at a factory of an apparel shop in Jaipur

BENGALURU (Reuters) - India's factory activity accelerated slightly in April as strict restrictions to curb the devastating second-wave of COVID-19 infections dampened domestic demand, while prices surged at their sharpest pace in about seven years, according to a survey.

The rapidly spreading virus has infected over 300,000 people daily recently and resulted in a record number of deaths in the country, leading major provinces to reimpose strict restrictions that have curbed some business activity.

Still, the Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, edged up to 55.5 in April from March's seven-month low of 55.4, remaining above the 50-level separating growth from contraction for a ninth straight month.

Despite foreign demand expanding at its quickest pace in six months, a sub-index tracking overall demand declined to its lowest since August, indicating domestic demand suffered from the health crisis that has left hospitals and morgues overwhelmed.

Output also hit an eight-month low in April, though the pace of expansion remained solid.

"The PMI results for April showed a further slowdown in rates of growth for new orders and output, both of which eased to eight-month lows amid the intensification of the COVID-19 crisis," noted Pollyanna De Lima, economics associate director at IHS Markit.

"Still, the increases were strong by historical standards and the survey revealed other positive news. The headwinds facing manufacturers cannot be ignored, however."

Asia's third-largest economy was predicted to grow at a slower pace this fiscal year than previously thought due to the strong surge in coronavirus cases and a delay in vaccinations, a Reuters poll showed last week.

Firms cut jobs again last month, extending the year-long spree, but the rate of layoffs was the slowest since March 2020. Optimism about the year ahead also improved slightly.

Meanwhile, input costs surged at their strongest pace in nearly seven years, forcing firms to raise prices for their goods at the sharpest rate since October 2013, signaling overall inflation might remain elevated.

"The surge in COVID-19 cases could dampen demand further when firms' financials are already susceptible to the hurdle of rising global prices," added De Lima.

"Data for the coming months will be important at verifying whether client demand is resilient to these challenges or if producers will have to further absorb cost burdens themselves to secure new work."

However, that is unlikely to lead the Reserve Bank of India to tighten monetary policy anytime soon as the central bank is widely expected to hold to its promise of supporting economic growth.

(Reporting by Indradip Ghosh; Editing by Kim Coghill)

ę Reuters 2021
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