Manufacturing activity rebounded in June after losing some traction in May, with an uptick in new orders, output and input purchases, even as producers raised goods’ prices by the greatest extent in more than two years, and scaled up hiring to the highest level in at least 19 years, as per a survey-based index.
The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) increased to 58.3 in June, from May’s 57.5, indicating a sharper improvement in business conditions. A reading of over 50 on the index signals a rise in activity levels.
Despite a strong uptick in key metrics, producers’ optimism about prospects in the coming year slipped to a three-month low, with about 29% of firms expecting growth in output over the year ahead.
The performance of the consumer goods industry was especially strong, although substantial increases were also noted in the intermediate and investment goods categories, HSBC said in a statement on the index. Intermediate goods makers registered the quickest increase in input costs, while consumer goods producers led the upturn in output charges.
Although input costs receded from May levels, they were still among the highest in two years. Feedback from about 400 firms surveyed for the index suggested that staff expenses intensified in June, along with rising costs of transportation and materials used as inputs such as aluminium, plastic and steel.
New export orders also increased substantially in June, with companies attributing this to better demand from Asia, Australia, Brazil, Canada, Europe and the U.S. “Despite [export orders] easing from May, the rate of expansion was well above its long-run average,” HSBC said.
“Manufacturers were able to pass on higher costs to customers, as demand remained robust, resulting in improved margins,” said Maitreyi Das, global economist at HSBC. “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,” she added.
Overall, India’s manufacturing sector ended the April-June quarter on a stronger footing, she asserted.
