Image used for representative purpose only
| Photo Credit: N. Bashkaran

Factory activity expansion in India’s private sector fell to a joint-11 month low in November, while firms raised prices at the swiftest pace in over eleven years as input cost pressures began to bite, as per the survey-based HSBC India Manufacturing Purchasing Managers’ Index (PMI) that slipped to 56.5 from 57.5 in October. A reading of over 50 on the index indicates a rise in activity levels.

The 400-odd firms surveyed for the index cited higher outlays on freight, labour and materials that they passed on to clients, as input cost inflation intensified to the highest level since July, with companies naming pricier chemicals, cotton, leather and rubber as important pressure points.

New business orders and production levels increased at a softer pace as favourable demand conditions clashed with fierce competition and price pressures. However, fresh export orders gained pace to surge at the highest pace in four months, with firms reporting gains in orders from Bangladesh, mainland China, Colombia, Iran, Italy, Japan and Nepal, apart from major markets such as the U.S. and U.K. 

Output levels at surveyed factories grew at the slowest pace since December 2023, but employment levels continued to be ramped up for the ninth successive month, albeit at a lower scale than October. Firms reporting hiring staff on both permanent and temporary bases. Incidentally, for the first time since August 2017, factories reported an uptick in their stocks of finished goods, breaking a seven-odd year sequence of such stocks falling every month.

While producers continued to buy additional inputs to build inventories of raw materials, the rise in such purchases was the weakest in just under a year, S&P Global, which conducts the PMI surveys noted. Accumulated stocks thus fell to the weakest level so far in 2024.

“Business optimism was spurred by predictions that marketing efforts and new product releases will bear fruit. Recent capacity expansion efforts and forecasts of demand strength also underpinned upbeat also underpinned upbeat forecasts for output in 2025,” the firm said.

While the PMI reading was down slightly in November, it was still firmly within expansionary territory, and the four-month peak in new export orders led the manufacturing sector’s growth in November, said Pranjul Bhandari, chief India economist at HSBC. 

“The rate of output expansion is decelerating due to intensifying price pressures. Input prices for a variety of intermediate goods — including chemicals, cotton, leather, and rubber — rose in November, while output prices soared to an eleven-year high as rising input, labour, and transportation costs were passed on to consumers,” she reckoned.

Representational image only.
| Photo Credit: The Hindu

 

Manufacturing firms’ order books and output levels expanded at the fastest pace in nearly three years this August, as per the S&P Global India Manufacturing Purchasing Managers’ Index (PMI) that rose to 58.6 last month from 57.7 in July. 

A reading of over 50 on the index reflects growth in activity levels and August was the 26^th month in a row that the PMI score was above 50.   

Though input costs escalated, firms replenished their inventories at the second highest pace in 18-and-a-half years and restrained from hiking selling prices in tandem with higher costs. Firms raised output costs at the slowest pace in four months, though input costs rose at the fastest pace in a year. 

New orders grew at the fastest pace since January 2021, with export demand seeing the sharpest uptick since November last year. Firms surveyed for the index reported that they had secured new work from clients in Bangladesh, China, Malaysia, Singapore, Taiwan and the U.S. 

To cope with the additional work flow, Indian manufacturers reportedly hired a combination of permanent and temporary staff on both part- and full-time bases. However, overall employment grew at the slowest pace in four months. 

“The presence of stronger cost inflationary pressures serves as a reminder of the challenges inherent in managing growth. Firms addressed rising input prices by lifting selling charges. However, the need to maintain competitiveness helped restricted charge inflation,” noted Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. 

With the manufacturing PMI painting a vibrant picture of the sector in August, Ms. De Lima reckoned the sector looks set to provide a strong contribution to economic growth in the second quarter of 2023-24. Manufacturing GVA (Gross Value Added) grew 4.7% in the first quarter (April to June 2023) as per estimates released by the National Statistical Office on August 31.

“Companies’ strategic focus towards a global orientation were evident via a sharp and quicker expansion in international sales. Export-centric tactics should help ensure that production remains on an upward path in the coming months,” Ms. De Lima said.