Despite the rapid rise in new orders, backlogs of work expanded at a slower pace (51.6 vs. 52.6 in December) and supplier delivery times improved on the margin (50.3 vs. 50.5 in December). This likely reflected that employment continued to growth, albeit only very marginally (50.2 vs. 50.4 in December), and possibly also a pick up in hours worked.
Rising orders pushed firms to increase the quantity of purchases (60.5 vs. 55.7 in December) and stocks of purchases (56.1 vs. 53.5 in December). Moreover, they also stepped up the accumulation of stocks of finished goods (52.1 vs. 50.7 in December).
The news on the inflation front were, however, not encouraging. Input prices rose further (63.4 vs. 62.7 in December), while output price inflation was broadly unchanged (56.1 vs. 56.2 in December) and remained above historical averages.
Leif Lybecker Eskesen, Chief Economist for India & ASEAN, said, Manufacturing activity has clearly picked up pace, although it is not given that the recovery can be sustained. Unfortunately PMI inflation readings are not encouraging. Combined, todays numbers suggest that it would be premature to cut the policy rate in the short term.
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