Manufacturing, exports data show grim Indian outlook
Tuesday, 3 March 2009
MUMBAI, March 2 (Reuters): Indian manufacturing activity shrank for a fourth straight month in February and exports fell again in January, showing the economy remained under pressure in early 2009 and bolstering expectations of a rate cut.
The data followed figures last week showing economic growth at its slowest in nearly six years at the end of 2008, and analysts said that the worst may not have passed despite a number of government stimulus packages and central bank policy easings.
"Essentially we don't think the economy has bottomed out yet," said Nomura economist Sonal Varma, who expects the economy to hit a trough of 4.5 per cent annual growth in the June quarter.
"We clearly feel both room and need for further rate cuts with economic activity having deteriorated much faster than what was earlier expected," she said.
Manufacturing, which accounts for about 16 per cent of Asia's third-largest economy, showed some improvement in February from January, but still contracted and the fall in new orders from local and foreign clients picked up pace.
The ABN AMRO Bank purchasing managers'index (INPMI=ECI), based on a survey of 500 companies, rose to a seasonally adjusted 47.0 in February from January's 46.7. A reading below 50 signals economic contraction.
"The series correlates reasonably well with exports and offers a crumb of comfort in what remains a generally depressing environment," said Rober Prior-Wandesforde, senior Asian economist at HSBC.
Exports fell 15.9 per cent in January from year earlier, a fourth straight fall as the global downturn weakened demand, government data showed.
Still, the trade deficit (INTRD=ECI) narrowed to $6.1 billion in January from $7.6 billion in December as import values dropped 18.2 per cent, mainly due to the sharp fall in oil prices.
For April to January, the first 10 months of the fiscal year, exports rose 13.2 per cent to $144.3 billion from a year earlier, but the trade deficit grew to $99.1 billion from $66.8 billion.
India's economy grew an annual 5.3 per cent in the December quarter. Full-year growth in the 2008/09 fiscal year ending on March 31 is expected to be around 7 per cent, well below rates of 9 per cent or more in the previous three fiscal years.
The data followed figures last week showing economic growth at its slowest in nearly six years at the end of 2008, and analysts said that the worst may not have passed despite a number of government stimulus packages and central bank policy easings.
"Essentially we don't think the economy has bottomed out yet," said Nomura economist Sonal Varma, who expects the economy to hit a trough of 4.5 per cent annual growth in the June quarter.
"We clearly feel both room and need for further rate cuts with economic activity having deteriorated much faster than what was earlier expected," she said.
Manufacturing, which accounts for about 16 per cent of Asia's third-largest economy, showed some improvement in February from January, but still contracted and the fall in new orders from local and foreign clients picked up pace.
The ABN AMRO Bank purchasing managers'index (INPMI=ECI), based on a survey of 500 companies, rose to a seasonally adjusted 47.0 in February from January's 46.7. A reading below 50 signals economic contraction.
"The series correlates reasonably well with exports and offers a crumb of comfort in what remains a generally depressing environment," said Rober Prior-Wandesforde, senior Asian economist at HSBC.
Exports fell 15.9 per cent in January from year earlier, a fourth straight fall as the global downturn weakened demand, government data showed.
Still, the trade deficit (INTRD=ECI) narrowed to $6.1 billion in January from $7.6 billion in December as import values dropped 18.2 per cent, mainly due to the sharp fall in oil prices.
For April to January, the first 10 months of the fiscal year, exports rose 13.2 per cent to $144.3 billion from a year earlier, but the trade deficit grew to $99.1 billion from $66.8 billion.
India's economy grew an annual 5.3 per cent in the December quarter. Full-year growth in the 2008/09 fiscal year ending on March 31 is expected to be around 7 per cent, well below rates of 9 per cent or more in the previous three fiscal years.