Factory activity improved to six-month high in January

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India’s private sector manufacturing activity rebounded to a six-month high in January after hitting a one-year low in December, thanks to exports recording their best month in almost 14 years even as factory order books expanded at the fastest pace since July 2024, as per a private index based on a survey of 400-odd firms.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose from 56.4 to 57.7 in January, breaking a two-month streak of deceleration, with firms reporting buoyant demand even as they raised prices solidly but at the slowest pace in four months. A reading of over 50 on the index indicates a rise in activity levels.

While input cost pressures eased to an 11-month low, robust sales gains and upbeat forecasts prompted companies to recruit additional workers at a record pace in the first month of the fourth quarter of 2024-25. S&P Global which conducts the PMI survey, said job expansion levels were the greatest seen in nearly 20 years of data collection.

Companies ramped up production volumes at the fastest rate since last October and turned more optimistic about prospects for the coming year with nearly 32% firms expecting growth and just 1% projecting a contraction in output.

Firms stocked up on inputs at the greatest extent in three months, but finished goods inventories dipped for the second straight month due to “a mismatch” in demand growth and production volumes. The rate of stock depletion from factory warehouses was the steepest in nearly three years. Yet, capacity pressures remained mild at factories.

“Domestic and export demand were both strong, supporting new orders growth. Input cost inflation eased for a second month, relieving pressure on manufacturers to raise final output prices,” said Pranjul Bhandari, chief India economist at HSBC.