India’s manufacturing activity rose to 58.3 in June, recovering from a three-month low of 57.5 in May, indicating a sharper improvement in business conditions, data released by S&P Global on Monday showed. The PMI was comfortably above its long-run average.
Growth in the Indian manufacturing sector recovered some of the ground lost in May, with the headline PMI posting nearly five points above its long-run average. The June data showed that the buoyant demand conditions spurred the expansions in new orders, output and buying levels. This led to the fastest rate of hiring in more than 19 years despite inflationary pressures remaining elevated, the survey reported. The rate of job creation was the strongest seen since data collection started in March 2005.
Further, it stated that the cost pressures receded from May, but were nevertheless among the highest over the past two years. As a result, companies lifted selling prices to the greatest extent since May 2022.
Maitreyi Das, Global Economist at HSBC, said, “The Indian manufacturing sector ended the June quarter on a stronger footing. The headline manufacturing PMI rose by 0.8 percentage points to 58.3 in June, supported by increased new orders and output. Consequently, firms increased their hiring at the fastest pace in over 19 years. Input buying activity also rose during the month.
The survey showed that inflationary pressures remained elevated as cost prices increased at a marginally slower pace from May. “On the price front, input costs moderated slightly in June, but remained at elevated levels. Manufacturers were able to pass on higher costs to customers, as demand remained robust, resulting in improved margin. While the overall outlook for the manufacturing sector remains positive, the future output index receded to a three-month low, albeit it remains above the historical average,” Maitreyi Das added.
S&P Global said that the manufacturing output increased at a sharp pace that was faster than in May, as underlying demand remained favourable and new business continued to flow in. The performance of the consumer goods industry was especially strong, although substantial increases were also noted in the intermediate and investment goods categories.
Further, June also saw new export orders increase substantially again. Companies attributed higher inflows of new work from overseas to better demand. The orders came in from Asia, Australia, Brazil, Canada, Europe and the US.
S&P Global said, “The outlook for the manufacturing sector remained positive, with nearly 29 per cent of panellists expecting output growth over the coming year. Firms forecast further improvements in demand and order book volumes in the year ahead, with advertising and greater client enquiries also underpinning optimism. The overall level of confidence receded to a three-month low, however.”
The Indian economy expanded 8.2 percent in FY24 due to stronger manufacturing and capex growth.