India’s manufacturing sector activity slowed to an 18-month low in December due to softening of output and new orders, a monthly survey said on Wednesday.
The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) fell to 54.9 last month from 56 in November. A PMI reading above 50 indicates an overall expansion in manufacturing activity compared to the previous month and a print below 50 shows an overall decrease.
Despite a loss of growth momentum, the manufacturing sector still expanded strongly in the month. There were softer, albeit sharp, increases in factory orders and output, while business confidence towards the year-ahead outlook strengthened, S&P Global said.
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“India’s manufacturing sector continued to expand in December, although at a softer pace, following an uptick in the previous month. Growth of both output and new orders softened, but on the other hand, the future output index rose since November. Rates of increase in input and output prices were broadly unchanged,” said Pranjul Bhandari, Chief India Economist at HSBC.
During the reporting month, new business gains, favourable market conditions, fairs and expositions collectively induced another sharp increase in manufacturing production.
However, the rate of expansion softened to the weakest since October 2022 even as it remained above its long-run average. Growth was reportedly curbed by fading demand for certain types of products, S&P Global said.
New orders placed with Indian manufacturers rose sharply but to a lesser extent in December. The pace of expansion was the slowest seen in a year-and-a-half.
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December data showed a twenty-first consecutive increase in international order receipts at goods producers in India. Companies noted gains from clients in Asia, Europe, the Middle East and North America. New export sales expanded at a moderate pace that was the joint-slowest in eight months.
Goods producers signalled a further uptick in purchasing costs at the end of the 2023 calendar year. Among the items reported to have been up in price were chemicals, paper and textiles.
Little-changed from November, however, the rate of inflation was negligible by historical standards and was the second-weakest in just under three-and-a-half years, the survey said.
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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, it said.
Employment was largely stable in December, with the respective seasonally adjusted index registering only fractionally above the 50 no-change mark.
In terms of stocks, the latest results showed a further increase in input holdings alongside another decline in inventories of finished products. The latter was attributed to the fulfilment of orders from warehoused items.
When assessing the year-ahead outlook for production, S&P Global said, Indian manufacturers were at their most upbeat for three months.
The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.