The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) fell to 54 in March from 54.9 in February, with both production and sales growing at the slowest pace in six months and inflation concerns driving down firms’ business confidence to the lowest level in two years.
A reading of 50 on the PMI indicates no change in business activity levels. New export orders received by Indian goods producers declined modestly during March, ending an eight-month growth streak.
"The slowdown was accompanied by an intensification of inflationary pressures, although the rate of increase in input costs remained below those seen towards the end of 2021," Pollyanna De Lima, economics associate director at S&P Global, said. Specifically, prices for chemicals, energy, fabric, foodstuff and metals were higher than February and the overall rate of inflation faced by producers quickened.
“Output prices rose in March as goods producers sought to share a part of the additional input cost burden with customers, taking the charge inflation to a five-month high,” S&P Global said.
“For now, demand has been sufficiently strong to withstand price hikes, but should inflation continue to gather pace we may see a more significant slowdown, if not an outright contraction in sales,” said Ms. De Lima, economics associate director at S&P Global, noting that the latest PMI indicates weakening manufacturing sector growth in India in the last month of the financial year.
After three successive months of shedding jobs, the manufacturing sector saw ‘a broad stabilisation in headcounts’ but firms indicated that payroll numbers were sufficient to cope with current requirements, dampening prospects for new jobs.
Anecdotal evidence indicated that inflation concerns and economic uncertainty dampened overall confidence, the firm said in a note on the Index which is based on responses from 400 manufacturers and adjusted for seasonal variations thereafter.
Additional input purchases in March grew at the weakest pace since August 2021, but was still ‘marked’. Yet, pre-production inventories rose for the ninth month in a row, recording a sharper and quicker uptick than February. On the other hand, constraints on suppliers appeared to ease, as delivery times lengthened by the shortest extent in almost a year, S&P Global said.
