Indian manufacturing sustains robust growth in January despite rising Covid-19 cases
#PMI #IndianManufacturing #ManufacturingGrowth #FactoryOrders“The latest PMI results indicated that the new wave of Covid-19 had a mild impact on the performance of the Indian manufacturing sector. A number of measures such as output, new orders and input buying remained in expansion mode. Although growth rates eased, they were historically strong.” - Pollyanna De Lima, Economics Associate Director at IHS Markit
February 2022 : Operating conditions across India’s manufacturing industry improved further at the start of the year, although the new wave of Covid-19 somewhat restricted growth. January data showed the slowest increases in new orders and output in four months, but rates of expansion remained historically elevated.
Similarly, there was a substantial, albeit softer upturn in input buying. Concurrently, concerns surrounding the pandemic, the possibility of further restrictions being introduced and price pressures dragged down business confidence to a 19-month low.
While input cost inflation eased for the third month running, to the weakest since last September, factory gate charges rose at a quicker pace than in December.
The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index® (PMI®) was at 54.0 in January, down from 55.5 in December and signalling the weakest improvement in the health of the sector since last September.
Still, the headline figure remained above its long-run average (53.6). Amid reports of robust gains in new business, companies scaled up production in January. The upturn was marked in the context of historical data, despite easing to the slowest since September 2021. Growth was reportedly stymied by raw material scarcity, inflationary pressures and the intensification of the pandemic.
Similarly, factory orders rose at the slowest rate in four months but one that outpaced its long-run average. International sales likewise increased at a weaker pace. Although goods producers forecast output growth in the year ahead, overall sentiment was dampened by pandemic-related uncertainty and inflation expectations. The overall level of business confidence slipped to its lowest mark in over 1.5 years. Tamed business optimism contributed to another monthly decline in manufacturing jobs. The fall was modest, but quickened from December. Several companies indicated that workforce numbers were sufficient to cope with current production requirements.
On the price front, there was a further substantial increase in input costs facing goods producers. The overall rate of inflation eased to a four-month low, but remained above its long-run average. Output charges were raised at a quicker rate than in December, albeit one that was moderate overall.
Indian manufacturers continued with their restocking efforts in January, purchasing additional inputs at a marked pace. The upturn was, however, the slowest since September 2021. Input inventories continued to increase at the start of the year, taking the current stretch of accumulation to seven months. Although marked, the rate of expansion softened to a five-month low. On the other hand, stocks of finished goods decreased further amid the fulfilment of orders from inventories. The reduction was marked and quicker than that recorded at the end of 2021.
Finally, latest data indicated that pressure on suppliers to the Indian manufacturing sector remained mild. Average lead times lengthened moderately, and to a lesser extent than in December.
Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said: “The latest PMI results indicated that the new wave of Covid-19 had a mild impact on the performance of the Indian manufacturing sector. A number of measures such as output, new orders and input buying remained in expansion mode. Although growth rates eased, they were historically strong. Companies sought to rebuild input stocks by purchasing additional raw materials and semi-finished items, but uncertainty surrounding growth prospects resulted in further job shedding.
“Survey participants were concerned that production growth would be hampered by inflationary pressures, the escalation of the pandemic and any new restrictions it would bring. The overall level of business confidence tumbled to a 19-month low.
“Input cost inflation receded for the third month in succession during January, but several companies again mentioned that input shortages led suppliers to hike their fees. Such increases continued to feed through to final product prices as firms transferred additional cost burdens to clients. In fact, output charges rose at a faster pace at the start of the year.”
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