India’s Manufacturing Activity Rebounds in June: PMI

New Delhi: Despite having elevated inflationary pressures, India's manufacturing activity in June witnessed a rebound, thanks to strong demand leading to the fastest rate of hiring in more than 19 years. Besides, the stronger expansion in sales for the manufacturers in the country was largely due to buoyant underlying demand, higher export volumes, increased government spending and successful advertising, a private survey showed on Monday.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index or PMI increased from 57.5 in May to 58.3 in June, indicating a sharper improvement in business conditions. In PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

June data showed that the stronger expansion in sales at manufacturers in India was largely due to buoyant underlying demand, higher export volumes and successful advertising. As a consequence of ongoing increases in new order intakes, firms stepped up recruitment. The rate of job creation was sharp and the strongest seen since data collection started in March 2005.

Commenting on the June numbers, Maitreyi Das, global economist at HSBC, said that the Indian manufacturing sector ended the June quarter on a stronger footing. “The headline manufacturing PMI rose by 0.8 percentage points to 58.3 in June, supported by increased new orders and output. Consequently, firms increased their hiring at the fastest pace in over 19 years and input-buying activity also rose during the month,” Das said.

On the price front, Das further said that input costs moderated slightly in June, but remained at elevated levels. “Manufacturers were able to pass on higher costs to customers, as demand remained robust, resulting in improved margins. While the overall outlook for the manufacturing sector remains positive, the future output index receded to a three-month low, albeit it remains above the historical average,” Das added.

However, the survey said that staff expenses reportedly intensified in June, which coupled with rising material and transportation costs caused another overall increase in operating expenses. “Manufacturers in India were able to share additional cost burdens with their clients amid conducive demand conditions. Selling charges were raised to the greatest extent in over two years,” it said.

“Meanwhile, new export orders increased substantially in June. Companies attributed higher inflows of new work from overseas to better demand from Asia, Australia, Brazil, Canada, Europe and the US. The outlook for the manufacturing sector remained positive, with nearly 29 per cent of panellists expecting output growth over the coming year,” the survey noted.