Manufacturing PMI eases to a 14-month low in February

The seasonally adjusted HSBC India Manufacturing PMI was recorded at 56.3 in February, down from 57.7 in January but still indicative of a further robust improvement

India’s manufacturing activity eased to a 14-month low in February on slowing new orders and production despite higher rates of expansion in output and sales, a private survey showed.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) was recorded at 56.3 in February, down from 57.7 in January but still indicative of a further robust improvement. A reading above 50 denotes expansion, and below 50 denotes a decline.

“Robust global demand continued to boost growth in the manufacturing sector, which increased its purchasing activity and employment. Business expectations also remained very strong, with nearly one-third of survey participants foreseeing greater output volumes in the year ahead,” Pranjul Bhandari, chief India economist at HSBC, said.

“Although output growth slowed to the weakest level since December 2023, overall momentum in India’s manufacturing sector remained broadly positive in February,” Bhandari added.

Strong domestic and international demand led firms to boost purchasing and hire more workers at higher rates, keeping prices high despite lower cost pressures, the survey showed.

Business conditions improved across all three monitored sub-sectors: consumer, intermediate and investment goods.

Output increased midway through the final fiscal quarter, continuing the growth streak to 44 months.

Manufacturers noted sustained improvements in demand, tech investments, and new projects where increases were found.

Although sharp overall, the rate of expansion eased to the weakest since December 2023.

February data showed a 44th consecutive rise in new business, attributed to strong client demand and competitive pricing efforts.

The overall growth pace slowed to the slowest since December 2023 but remained above the long-term average.

New export orders increased significantly in February, with manufacturers leveraging strong global demand. Although slower than January’s near 14-year peak, the expansion was sharp.

In response to the upturn in new orders, manufacturers continued to expand their workforce numbers in February, extending the current period of employment growth to a year.

The rate of job creation was the second best in the series history, behind only that recorded in January.

One in 10 firms signalled greater recruitment activity, while 1% of companies shed jobs.

Manufacturers also faced another increase in input costs, with frequent reports of greater bamboo, leather, marketing, rubber and telecom prices.

Encouragingly, the overall rate of inflation eased for the third straight month to its weakest in a year.

Data showed that firms passed on higher labour costs to clients, facilitated by favourable demand conditions.

Firms expressed strong optimism in the survey about growth prospects for the coming year, with client demand expected to remain positive and support output.

Unfinished business rose further in February, as demand growth continued to outpace increases in production. The rate of backlog accumulation reached its highest since January 2024, the survey showed.

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