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Manufacturing Rolls Ahead In India

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[India's manufacturing growth picked up in April to reinforce expectations the Reserve Bank of India (RBI) will raise interest rates this week, while China's factory sector cooled to suggest monetary tightening was biting into the economy deeper than expected. India's manufacturers expanded in April for the 25th consecutive month and at their strongest pace since November, an HSBC Markit purchasing managers' index showed on Monday. The PMI rose to 58.0 from 57.9 in March. A reading above 50 indicates expansion, while a reading under 50 to contraction. Inflation indicators in the monthly report showed some easing in price pressures, but from elevated levels, to suggest the RBI will raise interest rates on Tuesday for the ninth time since March 2010. "The number confirm that growth is not a concern and that the RBI can continue its tightening cycle uninterrupted," said Leif Eskesen, chief economist for India and ASEAN at HSBC. Data on Sunday showed China's official PMI fell to 52.9 in April from 53.4 in March, falling short of market forecasts for a rise to 54 as growth in new orders weakened to an eight-month low. Although the figures marked the 26th straight month that the manufacturing sector had expanded, they flashed worrying signals for the global economy, which has grown reliant on Chinese demand as a source of growth with the United States, Europe and Japan struggling to recovery from the global crisis. "Overall, the PMI shows there is still a possibility that the Chinese economy may slow down, especially as falling demand growth leads to adjustments in inventories, increasing the possibility of slowing economic growth," said Zhang Liqun, a government researcher. "The fall may show that export growth will continue to slow down," Zhang said in a comment on behalf of the China Federation of Logistics and Purchasing, which compiles the official PMI. China's inflation is running at its fastest in nearly three years even after a series of policy steps to rein in prices, including raising interest rates and banks' reserve requirements several times, as well as ordering banks to lend less and speeding the pace of currency appreciation. Economists polled by Reuters still expect strong economic growth in China this year of around 9.5 percent, so remain on guard for further monetary tightening to bring inflation under control. Like China, the U.S. manufacturing sector is also expected to have slowed down in April. The Institute for Supply Management index of national factor activity is expected to show a fall to 59.9 in April from 61.2 in March and 61.4 in February, which was the highest rate of growth since May 2004. Euro zone figures, due around 0800 GMT, are forecast to show factory activity held steady in April from March. In South Korea, the HSBC Markit manufacturing PMI fell to its lowest level since November last year at 51.69 in April from 52.84 in March. A stronger won currency depressed imported and component prices, said Hana Daetoo Securities economist So Jae-yong. Inflation in South Korea lagged expectations for April on a sharp drop in food prices, data showed on Monday, easing pressure on the central bank to raise interest rates although economists said they still expect a 25 basis point rise this month. The Reserve Bank of India is expected to raise interest rates on Tuesday for the ninth time since March 2010, probably by 25 basis points but possibly by 50 bps after March headline inflation rose to nearly 9 per cent. (Reuters)