Stronger Improvement in Indian Manufacturing Industry’s Operating Conditions in November 2023

#PMI #IndianManufacturingIndustry #ManufacturingEconomy

“Sustained new order growth continued to be good news for the sector’s labour market, with recruitment remaining on an upward path. Expanded capacities, rising workloads and the need to replenish stocks of finished goods collectively indicated that India’s manufacturing economy is clearly in good shape as 2023 draws to a close, with expectations for a continued strong performance in 2024.” - Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence

December 2023 : The Indian manufacturing industry continued to perform well in November. After slowing in October, growth of output gathered pace as strengthening client demand and more favourable input supply boosted production volumes. Inflationary pressures retreated, with purchase costs rising at the weakest pace since the current sequence of increases began in August 2020. Charges rose modestly, as the vast majority of firms opted to leave their fees unchanged since October.

Picking up from October’s eight-month low of 55.5 to 56.0 in November, the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) indicated a stronger improvement in operating conditions. The reading was below the average for the second fiscal quarter (57.9), but outpaced the series trend. A key feature of the latest results was a substantial easing of price pressures. Although average purchasing costs rose again, the rate of inflation eased to the lowest in the current 40-month sequence of increases and was negligible by historical standards.

Rising costs translated into increased selling prices, albeit one that was the weakest in seven months. Manufacturers that hiked their fees, which were fewer than seven percent of panellists, mentioned demand strength, greater labour costs and the usage of higher-quality inputs in production processes. November data showed another substantial increase in overall levels of new work received by Indian goods producers. Moreover, the growth rate improved from October's one-year low and outpaced the series average. Surveyed companies commonly reported positive demand trends, greater client requirements and favourable market conditions.

The trend for new export business showed signs of resilience, despite weakening in November. New export orders rose for the twentieth month in a row and solidly, albeit at the slowest rate since June. On the upside, companies signalled higher intakes of new business from Africa, Asia, Europe and the US.

With total new sales rising, demand conditions remaining positive and input supply relatively improving, Indian manufacturers scaled up production volumes. Output expanded sharply and at an above-trend pace. Manufacturing employment in India increased for the eighth successive month heading towards the end of the 2023 calendar year. New work in the pipeline and a healthy demand environment spurred recruitment, anecdotal evidence showed. Growth ticked higher, but was moderate overall. Purchasing activity and stocks of inputs rose during November, in many cases owing to buoyant demand conditions. Finished goods inventories fell, however, as manufacturers found themselves digging into warehouses to fulfil sales requirements. Average vendor performance worsened only marginally in November, as the vast majority of panellists (99 percent) reported no change in delivery times since October. With regards to their own capacities, firms collectively signalled mild pressures. This was seen by a slight increase in outstanding business levels.

The outlook for India's manufacturing sector remained favourable in November, with firms seeing opportunities in the form of demand strength, marketing initiatives and new clients making enquiries about a wide range of products. That said, the overall level of positive sentiment slipped to a seven-month low amid rising inflation expectations.

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said: “India’s manufacturing industry maintained its robust performance in November, with output regaining growth momentum. Firms’ ability to secure new business, both domestically and from abroad, remained central to the success of the sector. Sustained new order growth continued to be good news for the sector’s labour market, with recruitment remaining on an upward path. Expanded capacities, rising workloads and the need to replenish stocks of finished goods collectively indicated that India’s manufacturing economy is clearly in good shape as 2023 draws to a close, with expectations for a continued strong performance in 2024. Prices for raw materials and components still rose in November, but improved availability at suppliers amid subdued global demand for inputs led to a considerable retreat in cost pressures. Some concerns over prices increasing in the near-term were reflected in the data for business sentiment, but there was also a softer uptick in output charges amid a reduced inflationary environment.”

Pro MFG Media Newsletter

Get regular manufacturing insights that matter and enable business.