India's June factory activity ticks up, hiring expands: survey

Mon Jul 2, 2012 1:09am EDT
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BANGALORE (Reuters) - Indian factories in June stepped up production and hired workers at the fastest rate in more than two years, but sagging demand abroad took a toll on growth in new export orders, a survey showed on Monday.

The HSBC manufacturing Purchasing Managers' Index (PMI) rose to 55.0 in June, a four-month high, from 54.8 in May. It has kept above the 50 mark that divides growth and contraction for more than three years.

Still, the survey raised some concerns. High prices continue to weigh on manufacturers, with both input and output costs rising sharply from May. That underscored expectations the central bank is unlikely to cut key interest rates soon.

Asia's third-largest economy is grappling with slowing economic growth but high inflation at a time when the health of the global economy is deteriorating. A slump in factory activity in China and Japan deepened in June [nL3E8I109O].

"Activity in the manufacturing sector kept up the pace in June with output and employment expanding at a faster pace," said Leif Eskesen, economist at HSBC.

The employment sub-index was at 52.4 in June, the highest level since May 2010.

While the PMI suggested domestic demand was holding up, signs from abroad looked more ominous.

New export orders grew at their slowest pace since November 2011, with demand weakening in top trading partners Europe and the United States.

"New order growth decelerated slightly led by export orders while stock levels rose, suggesting a slight moderation in output growth going ahead," HSBC's Eskesen said.   Continued...