India’s manufacturing activity moderated in March, with the HSBC India Purchasing Managers’ Index (PMI) falling to 53.9 in the month from 56.9 in February. This represents the weakest expansion in overall business conditions since June 2022, attributed to “cost pressures, fierce competition, heightened market uncertainty, and the ongoing war in the Middle East, which led to softer increases in new orders and production.”
Commenting on the data, Pranjul Bhandari, Chief India Economist at HSBC, said, “Disruptions linked to the conflict in the Middle East are reverberating through the global economy and weighing on Indian manufacturers. Output and new orders slowed noticeably, signalling softer demand and greater uncertainty. Meanwhile, input costs rose sharply across a broad range of items, including aluminium, chemicals and fuels. For now, firms appear to be absorbing much of the increase, keeping output prices relatively contained.”
Compiled by S&P Global from responses of around 400 manufacturers, the seasonally adjusted PMI tracks changes in new orders, output, employment, supplier delivery times, and stocks of purchases. A reading above 50 signals expansion, while below 50 indicates deterioration.
“The two largest sub-components of the PMI, new orders and output, rose at the slowest rates since mid-2022. Anecdotal evidence showed that growth was curbed by challenging market conditions, cost pressures and the war in the Middle East,” the report said. It stated that the March data showed input prices increased to the greatest extent in over three-and-a-half years. “Aluminium, chemicals, fuel, jute, leather, fabric, oil, rubber and steel were some of the items reported to be up in price.” Despite this, manufacturers limited increases in factory gate charges to the slowest pace in two years, as many firms absorbed higher costs to retain existing customers and attract new ones.
Employment continued to expand, with job creation reaching its strongest rate in seven months. Manufacturers also increased input purchases to build contingency stocks and support production, though the overall growth eased to a three-month low while remaining historically strong. Pre-production inventories rose at a sharp pace (above the long-run average), though the rate of accumulation slowed to a 40-month low.
Finished goods inventories, meanwhile, saw a marginal decline as firms drew down stocks to fulfil orders. Supplier delivery times improved, reflecting comfortable capacity among vendors, though the vast majority of respondents (92%) reported no change from the previous month. Outstanding business volumes fell for the first time in close to a year-and-a-half, aided by additional hiring and the softer rise in new orders.
On the trade front, external sales registered the strongest expansion since last September, with gains reported from clients in Australia, Brazil, Canada, mainland China, Europe, Japan, the Middle East, Turkey, and Vietnam. Manufacturers also grew more optimistic about the year-ahead outlook for production.
TOPICSManufacturingThis article was first uploaded on April two, twenty twenty-six, at two minutes past ten in the night.