March 4, 2024
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Manufacturing activity climbs to 5-mth high
A rise in new export orders and sustained domestic demand pushed manufacturing activity to a five-month high in February, according to results of a private survey released Friday.
The HSBC India Manufacturing Purchasing Managers’ Index rose to 56.9 in February compared with 56.5 in the previous month, with new export orders rising to the highest level in 21 months.
“The HSBC final India Manufacturing PMI indicates that production growth continued to be strong, supported by both domestic and external demand,” said Ines Lam, economist, HSBC.
Australia, Bangladesh, Brazil, Canada, mainland China, Europe, Indonesia, the US and the UAE drove external demand.
There was more good news on the domestic front, as domestic price pressures for firms reached the lowest level in 43 months.
The retreating of input cost inflation also had an impact on prices charged by manufacturing firms, with only 8% of 400 manufacturers surveyed passing on costs to consumers.
“Among the 8% of panellists that hiked their fees, there were mentions of the passing on of greater freight, material and wage costs to clients,” the report noted, highlighting that charge inflation was lowest since April 2023.
Lower charges by manufacturers translate into lower core inflation for the economy. The core inflation declined to 3.3% in January, according to data released a fortnight ago.
On the other hand, lower input prices indicate better profit margins for firms.
“Manufacturing firms’ margins improved as input price inflation slipped to the lowest since July 2020. Buoyed by robust demand and improving profit margins, manufacturers have an optimistic outlook about future business conditions,” said Lam.
The employment situation remained a matter of concern. Despite the increase in factory orders and production, firms refrained from ramping up hiring.
“Goods producers mentioned that payroll numbers were sufficient for current requirements,” the report stated.
