India's Manufacturing PMI at 18-Month Low

New Delhi: Despite the fall in the index, India's manufacturing sector activity continued to expand in December, showing a sharp pace of growth, albeit the slowest since November 2022. As the festive demand is waning, the HSBC Purchasing Managers' Index (PMI) came in at an 18-month low of 54.9 from 56.0 in November, still showing a marked improvement in the health of the sector. Nevertheless, the manufacturing PMI has now spent 30 consecutive months above the key level of 50 that separates expansion and contraction in activity, a private survey showed on Wednesday.

The index is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. The index gives an indication of the performance of the manufacturing sector in advance, before release of official data.

“The pace of growth seen in December was sharp, albeit the slowest since November 2022. When assessing the year-ahead outlook for production, Indian manufacturers were at their most upbeat in three months. Anecdotal evidence highlighted advertising, better customer relations, and new enquiries as the main factors boosting business confidence in December,” the survey showed.

Commenting the survey, Pranjul Bhandari, chief India economist at HSBC, said that India’s manufacturing sector continued to expand in December, although at a softer pace, following an uptick in the previous month. "The growth of both output and new orders softened, but on the other hand, the future output index rose since November. Rates of increase in input and output prices were broadly unchanged."

The survey further said that though the sector lost momentum in December, it is still expanding strongly. “There were softer, albeit sharp, increases in factory orders and output, while business confidence towards the year-ahead outlook strengthened,” it said, adding that the input costs rose at the second-slowest rate in nearly three-and-a-half years, and charge inflation softened to a nine-month low.

As per the survey, a general lack of pressure on the capacity of manufacturers at the end of the third fiscal quarter. "This was evidenced by a marginal uptick in outstanding business volumes. Subsequently, “employment was largely stable in December, with the respective seasonally adjusted index registering only fractionally above the 50.0 no-change mark,” the survey said.