NEW DELHI: India’s manufacturing activity slowed in November, with the Purchasing Managers’ Index (PMI) dropping to a 11-month low of 56.5, down from 57.5 in October, despite downward movements in most of its subcomponents, data released by S&P Global on Monday showed. The drop signalled a softer improvement in the health of the sector and the pace of growth remained above its long-run average.
Pranjul Bhandari, Chief India Economist at HSBC, said, “India recorded a 56.5 manufacturing PMI in November, down slightly from the prior month, but still firmly within expansionary territory. Strong broad-based international demand, evidenced by a four-month high in new export orders, fuelled the Indian manufacturing sector’s continued growth. At the same time, however, 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.”
According to the survey report accompanying PMI, positive demand trends fed through to sharp expansions in sales and output, though firms indicated that growth was somewhat restricted by competitive conditions and price pressures. In this regard, the latest data showed that a quicker upturn in cost burdens sparked the steepest rise in selling prices in over 11 years.
Goods producers experienced a weaker, albeit still robust, upturn in new business intakes during November. Indeed, the report showed that Indian goods producers increased their selling prices to the greatest extent since October 2013. Survey participants suggested that additional outlays on freight, labour and materials had been shared with clients. Input cost inflation intensified midway through the third fiscal quarter, reaching its highest mark since July but remaining below its long-run average.
Although price pressures curbed domestic sales to a certain extent, growth of new export orders gained momentum, the report by S&P Global stated. The rate of expansion in international demand was the best seen for four months, with gains reported from Bangladesh, mainland China, Colombia, Iran, Italy, Japan, Nepal, the UK and the US.
With demand conditions remaining favourable, Indian manufacturers continued to scale up production. The rate of expansion receded to the weakest in the calendar year-to-date, though remained historically strong. Further, S&P Global stated that for the ninth month in a row, factory employment in India increased during November. Despite softening from October, the rate of job creation remained solid and these hires are on both permanent and temporary bases.
The S&P Global report said, “Indian manufacturers purchased additional inputs for use in production processes and to place into inventories. The rise in buying levels was sharp, albeit the weakest in just under a year. Average lead times shortened further, reportedly due to strong relationships with long-standing suppliers. The improvement in vendor performance was mild but nevertheless the best since July.”
Source: The Financial Express
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