February 21, 2024

India’s manufacturing PMI stood at 56.0 in November.

India’s manufacturing sector activity continued to expand in December, although the HSBC Purchasing Managers’ Index (PMI) came in at an 18-month low of 54.9, data released on January 3 showed.

At 54.9, the December manufacturing PMI is well below 56.0 posted in November. However, despite the fall, the gauge of manufacturing sector activity in December was above the key level of 50, which separates expansion in activity from contraction, for the 30th month in a row.

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According to S&P Global, which compiles the index, the December PMI print was “indicative of a marked improvement in the health of the sector”.

“The latest reading was above the long-run series trend, but contributed to the lowest quarterly average (55.5) since Q1 2022-23,” it added.

In December, the pace of increase in new orders was the slowest seen in a year-and-a-half, dragging down the growth in manufacturing output to the lowest since October 2022 due to “fading demand for certain types of products”. However, international orders continued to rise for the 21st consecutive month in December, although new export sales rose at their slowest pace in eight months.

Tellingly, the data for December showed “a general lack of pressure on the capacity of manufacturers”, S&P Global said. As a result, employment was largely stable and its sub-index only marginally above 50.

Signs of increased capacity utilisation is crucial for manufacturers to raise their capital expenditure.

“When assessing the year-ahead outlook for production, Indian manufacturers were at their most upbeat for three months. Anecdotal evidence highlighted advertising, better customer relations, and new enquiries as the main factors boosting business confidence in December,” S&P Global said.

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Also Read: Another month of good CPI, IIP data but base effect muddies waters

There was better news on the prices front, with the rate of inflation of manufacturers’ costs in December at its second-weakest level in nearly three-and-a-half years. Meanwhile, prices charged by manufacturers rose more than the increase in input costs for the fourth month in a row.

“Survey participants that hiked their fees in December mentioned the pass-through of recently absorbed cost burdens to clients,” the survey report noted.