Bleak Q3 manufacturing outlook for SMEs, large companies: survey

Manufacturers from both the small and medium enterprise (SME) and the large segments are “less optimistic” on the outlook for the sector in the October- December quarter owing to factors like rupee appreciation impacting exports and issues related to GST implementation, according to a report.

Industry body FICCI’s latest quarterly survey on manufacturing suggests slightly less optimistic outlook for the manufacturing sector in the December quarter as the percentage of respondents reporting higher production in third quarter has fallen as against the previous quarter.

The outlook for exports appears less optimistic vis-a-vis previous quarters. Although, 48 per cent respondents expect no change in the export levels, but 32 per cent expect exports to fall. The rupee appreciation has made the respondents apprehensive of exports outlook with a majority of the respondents (around 57 per cent) reporting that their exports were affected in the September quarter due to rupee rise.

Moreover, the hiring outlook for the sector remains subdued in near future as 85 per cent of the respondents in Q3 2017-18 mentioned that they are not likely to hire additional workforce in next three months.

“This proportion is much higher than the previous quarter, where 73 per cent of the respondents were not in favour of hiring additional workforce,” FICCI said.

However, the average interest rate paid by the manufacturers has slightly come down over last quarter showing signs of moderation with an average rate of 10.5 per cent but the highest rate continues to be as high as 15 per cent.

In terms of order books, about 42 per cent respondents in Q3 are expecting higher number of orders as against 47 per cent of Q2 2017-18 which again is reflecting subdued demand in economy.

The proportion of respondents reporting higher output growth during the Q3 (October-December 2017-18) has fallen to 47 per cent from 50 per cent in Q2, noted FICCI Survey.

However, the percentage of respondents reporting low production has also come down to 15 per cent in Q3 quarter from 18 per cent in Q2 (July-September) quarter.

The survey assessed the expectations of manufacturers for Q3 for twelve major sectors namely auto, capital goods, cement and ceramics, chemicals and pharmaceuticals, electronics & electricals, food products, leather and footwear, machine tools, metal and metal products, paper products, textiles and textiles machinery.

Responses have been drawn from over 310 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 3 lac crore.