India’s manufacturing sector experienced an 18-month low in activity for December, as reported by the HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global. The PMI fell from 56 in November to 54.9, indicating a softening of new orders and output. October already witnessed the slowest expansion rate since February, and any reading above 50 indicates expansion, while below 50 signifies contraction.
Despite the deceleration in growth momentum, the sector continued to expand, with notable increases in factory orders and output, albeit at a softer and sharper pace. Business confidence regarding the year-ahead outlook strengthened, demonstrating resilience. This follows the prior month’s data revealing India’s impressive 7.6% economic growth in the second quarter, driven by increased government spending and robust performances in manufacturing, mining, and construction.
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Despite the deceleration in growth momentum, the sector continued to expand, with notable increases in factory orders and output, albeit at a softer and sharper pace. Business confidence regarding the year-ahead outlook strengthened, demonstrating resilience. This follows the prior month’s data revealing India’s impressive 7.6% economic growth in the second quarter, driven by increased government spending and robust performances in manufacturing, mining, and construction.
In terms of inflation, India’s Consumer Price Index (CPI) inflation rose to 5.55% in November from 4.87% in October, exceeding the Reserve Bank of India’s target of 4% but remaining within the tolerance range of 2-6% for the third consecutive month. The tightening of interest rates globally, driven by inflation concerns, has influenced business, investment, and trade.
Pranjul Bhandari, Chief India Economist at HSBC, commented that while India’s manufacturing sector continued to expand in December, the growth in output and new orders softened. However, the future output index rose since November, indicating optimism. The rates of increase in input and output prices remained broadly unchanged.
Despite challenges, HSBC India PMI data showed a lack of significant pressure on manufacturers’ capacity at the end of the third quarter. Outstanding business volumes experienced only a marginal uptick, and employment remained stable in December. Assessing the year-ahead outlook for production, Indian manufacturers were reported to be at their most upbeat in three months, suggesting confidence in future prospects.