India’s manufacturing sector continued its recovery in February from an 18-month low in December, with production levels and sales rising at the fastest pace in five months, as per the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI).
A reading of over 50 on the PMI, which rose from 56.5 in January to 56.9 last month, indicates an expansion in activity. New export orders grew at the highest pace in 21 months, but employment levels changed little as firms felt existing staff strengths were enough to cope with the workload.
“The upturn in manufacturing output was the strongest seen for five months and led by the capital goods category… [However] capacity pressures at goods producers in India remained mild [and] the uptick was softer than that registered in January,” a statement on the survey-based index noted.
Output price increases slowed down to their joint-weakest since March 2023, while input cost rose only fractionally at the weakest rate since July 2020.
“Qualitative evidence highlighted higher prices for iron, paper and plastics parallel to reductions for cotton and steel,” the statement said. About 8% of the surveyed firms which raised prices referred to the need to pass on higher freight, material and wage costs to clients.
Keeping in mind increased demand, firms tanked up on raw materials, lifting stocks of purchases at the fastest rate since August 2023.
“February survey data indicated sustained optimism among manufacturers regarding the year-ahead outlook for production. The overall level of confidence was the second highest since December 2022,” the PMI note concluded.
“Production growth continued to be strong, supported by both domestic and external demand. Manufacturing firms’ margins improved as input price inflation slipped,” said Ines Lam, economist at HSBC, attributing businesses’ optimistic outlook to these two factors.
