Manufacturing PMI Further Reduced in July, Now Down to 46

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The decline in the country’s industrial sector further deepened in July as re-lockdowns were imposed in several states to prevent the transmission of infection of coronavirus. It was said in the monthly report released on the industrial sector on Monday. Due to the deepening of the slowdown in the sector, the country’s economy is expected to decline further.

The Nikkei Manufacturing Purchasing Managers’ Index (PMI) fell further to 46 in July. It was at 47.2 in June 2020. Manufacturing PMI has been below 50 for the fourth consecutive month. Thus, the manufacturing sector has recorded the longest period of decline since March 2009. However, amid the expectation that the main interest rate will fall, the PMI report said that expectations of better business in the next 12 months have reached a 5-month high in July.

An index below 50 means a drop in production

In the PMI, an index of below 50 means that the sector’s production has dropped. An index above 50 means that production has increased. The higher the fall or increase, the lower or higher the index is above 50.

Difficulty in getting new tender due to lockdown

IHS economist Elliot Kerr said companies faced difficulty in getting new tenders. This is because their customers were stranded in lockdown. This makes sense that the industrial sector is not going to accelerate until the infection is brought under control and unless restrictions are lifted.

 Inflation might fall

Input and output prices continue to fall. This gives hope that inflation will come down. Recently, the inflation rate exceeded the upper limit given to the Reserve Bank of India (RBI). The government has given RBI the responsibility to keep inflation between 2 and 6 per cent.

The interest rates may decrease

Lower inflation has increased the scope for RBI to reduce the main interest rate. To accelerate the sluggish economy due to Corona, RBI may further reduce the main interest rate. The RBI has cut the repo rate by a total of 1.15 per cent since March.

The decline in the world economy has paved the path for an upcoming depression. The world leaders are desperately putting in efforts to revive their respective economies, but the alarming rate in the increase of COVID-19 is making the chances of economic revival very slim. Since the rate of manufacturing is declining and is estimated to decline in the coming months if the rate of COVID positive patients decreases.

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