India’s manufacturing activity slipped to an 18-month low in December 2023, as per the HSBC India Manufacturing Purchasing Managers’ Index, whose reading for the month stood at 54.9 compared to 56 in November. A reading of over 50 on the index indicates expansion in activity.
Factories’ output grew at the slowest pace since October 2022, with demand for certain types of products fading, and new orders expanded at a pace that was the weakest in a year-and-a-half. International orders continued to grow in December, but at the joint-slowest rate in eight months.
Input costs rose at the second-slowest rate in nearly three-and-a-half years, while inflation in output charges paid by buyers softened to a nine-month low, as per 400-odd participants of the survey-based index which is put together by S&P Global.
The latest reading was above the long-run series trend, but contributed to the lowest quarterly average of 55.5 since the first quarter of fiscal year 2022-23, HSBC and S&P Global said in a statement.
Outstanding business volumes rose only marginally, creating little room for new jobs to be created. The HSBC India PMI data showed a general lack of pressure on the capacity of manufacturers at the end of the third fiscal quarter. Employment was largely stable in December, with the respective seasonally adjusted index only fractionally above the 50 mark that indicates no change in activity levels.
Companies continued to raise their inventories of inputs, albeit at the slowest rate since November 2022. However, their ‘year-ahead outlook’ was the most upbeat in three months.
“For the fourth month in a row, the rate of charge inflation surpassed that of input prices. Survey participants that hiked their fees in December mentioned the pass-through of recently absorbed cost burdens to clients,” the statement said. The key inputs for which higher prices were reported in December were chemicals, paper and textiles.
“Growth of both output and new orders softened, but on the other hand, the future output index rose since November,” remarked HSBC chief India economist Pranjul Bhandari.
