Manufacturing activity in April slips from March’s 16-year high

Manufacturing activity declined marginally in April from a 16-year peak in March amid strong demand conditions, the HSBC India Manufacturing Purchasing Managers (PMI) Index compiled by S&P Global showed.

The April PMI slipped to 58.8 after hitting 59.1 in March.  Despite the decline, the seasonally adjusted index was comfortably above both the neutral mark of 50.0 and its long-run average of 53.9, the survey said.

The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month and below 50 an overall decrease.

“April’s manufacturing PMI recorded the second fastest improvement in operating conditions in three-and-a-half years, bolstered by strong demand conditions which resulted in a further expansion of output, albeit slightly slower than in March. Improvements in suppliers’ delivery times contributed to increased purchasing activity. Additionally, a positive outlook for the year ahead prompted firms to expand their staffing levels,” Pranjul Bhandari, chief India economist at HSBC, said.

Cost pressures ticked higher but remained historically mild, pushing up charge inflation to the strongest since January.

“On the price front, higher costs of raw materials and labor led to a modest uptick in input costs, but inflation remains below the historical average. However, firms passed these increases onto consumers through higher output charges, as demand remained resilient, resulting in improved margins,” Bhandari said.

On the brighter side, Indian manufacturers reported robust demand for goods from domestic and external clients last month. Total new orders rose sharply, with the pace of expansion being the second strongest since 2021.

New export orders increased markedly, albeit at a softer rate than that seen for total sales, suggesting that the domestic market remained the main driver of growth.

“The pace of job creation was moderate, but nevertheless the quickest since September. Meanwhile, pressure on operating capacities remained mild as evidenced by a slight uptick in outstanding business volumes,” the study shows.

The respondents to the survey reported sales gains from Asia, Australia, Europe and the Americas.

Business confidence strengthened on expectations that demand will remain buoyant. Advertising and brand recognition were also reported as opportunities.

Stocks of purchases, one of the five sub-components of the headline figure, increased sharply in April. The rate of expansion was the third-strongest seen since data collection started in early-2005, just behind April previous and May 2023 figures.