India’s manufacturing sector activity ended in 2022 on a very positive note with December reporting output level best seen since November 2021, according to a monthly survey released on Monday. Posting 57.8 in December, up from 55.7 in November, the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index signalled the strongest improvement in operating conditions since October 2020. The PMI average for the third quarter of the current fiscal year (56.3) was the highest recorded in a year.
The latest PMI data corroborates signs of robust economic activities signalled by other indicators like GST collections, which stood at Rs 1.5 trillion in December, the third highest level this fiscal and robust auto fuel sales. The output of eight core sector industries grew 5.4% on year in November, recovered from their worst performance in 20 months in the previous month.
A PMI print above the 50-point mark separates expansion from contraction.
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“While some may question the resilience of the Indian manufacturing industry in 2023 amid a deteriorating outlook for the global economy, manufacturers were strongly confident in their ability to lift production from present levels,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.
Following a promising start to 2022, the Indian manufacturing industry maintained a strong performance as time progressed, wrapping the year with the best expansion in production seen since November 2021, De Lima said.
Demand resilience boosted sales growth in December, with the rate of increase picking up to the quickest since February 2021.
International demand for Indian goods also improved but did so to a lesser extent than in November. Overall, new orders from abroad rose at the slowest pace in five months as several companies reportedly struggled to secure new work from key export markets.
With overall demand remaining conducive to growth, manufacturers scaled up production at the end of 2022. The upturn in output was sharp and the best seen since November 2021. December data pointed to a further increase in buying levels among goods producers. Moreover, the rate of expansion was historically sharp and the strongest since May 2022.
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To address backlogged work, Indian goods producers hired additional staff at the end of the year. The latest increase in employment was the tenth in consecutive months but the slowest since September.
Cost pressures remained relatively muted in December, with the overall rate of inflation little changed from November and the second-slowest since September 2020. Underlying data indicated that price reductions for some raw materials partly offset increases elsewhere.
The S&P Global India Manufacturing PMI® is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. Data collection began in March 2005