April manufacturing PMI rises to 54.7- slowest growth in 4 years; Middle East conflict pushes up costs

Middle East conflict fuels inflation, manufacturing stays resilient: HSBC

Pranjul Bhandari, Chief India Economist at HSBC said, “India’s manufacturing PMI rose to 54.7 in April, up from 53.9 in March, but still marking the secondslowest improvement in operating conditions in nearly four years. Spillovers from the Middle East conflict are becoming more evident, particularly through inflation: input costs increased at the fastest pace since August 2022, and output prices rose at the quickest rate in six months.”

“Even so, output, new orders (including exports) and employment all grew moderately, pointing to continued resilience in India’s manufacturing sector,” Bhandari added.

Demand and output pick up, but pace stays subdued

New orders and output increased in April, supported by advertising efforts and steady demand. However, the pace of growth remained among the weakest seen in at least three-and-a-half years. Companies said competitive pressures, the ongoing Middle East conflict, and delays in client approvals continued to weigh on growth

Exports provide a strong boost

Export demand emerged as a bright spot during the month. New export orders expanded sharply, recording the fastest growth in seven months. Firms reported stronger demand from markets such as Australia, France, Japan, China, Saudi Arabia, the UAE, the UK and Kenya.

Middle East conflict pushes up costs

Manufacturers highlighted rising cost pressures due to the ongoing conflict in the Middle East. Input costs increased at the fastest pace in 44 months, driven by higher prices of aluminium, chemicals, fuel, rubber and petroleum products.The report said, “panellists often attributed hikes to the Middle East war.”

Firms raise selling prices

As input costs increased, companies passed on the burden to customers. Output charges rose at the fastest pace in six months. The overall rate of inflation climbed to its highest level since August 2022.

Consumer goods segment sees highest price rise

Among sectors, the consumer goods segment recorded a slower rise in input costs compared to others. However, it still saw the highest increase overall and topped the rankings for output price inflation.

Purchasing activity and inventories remain weak

Manufacturers continued to buy raw materials in April, but the pace of purchasing slowed to one of the weakest levels in nearly two-and-a-half years. Input inventories grew at the slowest rate in close to five years, as firms kept stocks lean due to subdued sales.

Finished goods inventories increased for the first time in six months, though the rise was marginal.

Hiring picks up despite weak backlogs

Companies increased hiring in April, with job creation reaching a ten-month high. This came even as growth in outstanding business volumes remained marginal. Firms said hiring was driven by expansion plans.

Business confidence stays strong

Manufacturers remained optimistic about future growth, although confidence eased slightly from March. The overall sentiment was still at its second-highest level since November 2024.

Companies said optimism was supported by expectations that marketing efforts will boost demand and pending projects will be approved.

Supply chains improve further

Supply chain conditions improved during the month, with firms reporting shorter delivery times. Manufacturers linked this to better coordination with both new and existing suppliers.