India's Manufacturing PMI Continues To Expand But At A Slower Pace

A worker at a concrete block manufacturing factory near the coal-fired NTPC Simhadri thermal power plant in the outskirts of Visakhapatnam, Andhra Pradesh, India, on Sunday, March 20, 2022. Photographer: Dhiraj Singh/Bloomberg

A gauge of activity across India's manufacturing sector slowed amid pricing pressures but remained in the expansion zone.

The India Manufacturing Purchasing Managers' Index stood at 54 in March compared with 54.9 in February, according to a monthly press release. A reading above 50 indicates economic expansion.

“The latest reading highlighted the joint-weakest rate of growth since September 2021,” the release said. Manufacturing PMI expanded at the same pace in January as well.

Manufacturing sector growth in India weakened at the end of FY22, with companies reporting softer expansions in new orders and production.

Pollyanna De Lima, Economics Associate Director, S&P Global

Survey participants attributed the expansion to successful marketing efforts and improved demand conditions, the release said. Rising sales supported an upturn in production volumes, the ninth in consecutive months, it said.

Manufacturers reported another increase in input prices at the end of FY22. Chemical, energy, fabric, foodstuff and metal costs were all reportedly greater than in February. The overall rate of inflation outpaced its long-run average, but was the second-slowest in six months.

Output prices rose in March as goods producers sought to share part of the additional cost burden with their clients, in line with long-run average.

There was a broad stabilisation in headcounts across the manufacturing industry, following three successive months of job shedding.

There was a renewed decline in new export orders received by Indian goods producers, ending an eight-month sequence of growth. The overall rate of reduction, however, was only modest.

March data pointed to subdued optimism toward growth prospects among Indian manufacturers, with the overall level of sentiment slipping to a two-year low because of inflation concerns and economic uncertainty dampening overall confidence.

“For now, demand has been sufficiently strong to withstand price hikes, but should inflation continue to gather pace we may see a more significant slowdown, if not an outright contraction in sales,” Lima said. “Companies themselves appeared very concerned about price pressures, a key factor dragging down business confidence to a two-year low.”