The seasonally adjusted HSBC Purchasing Managers’ Index— a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy – posted a reading of 53.2 in January, down from 54.7 in December. The latest reading signalled a further (albeit slower) improvement in the health of the Indian manufacturing sector, an HSBC statement said.
Continuing the trend that started in April 2009, output at manufacturers in India rose during January. While solid, the rise in production was the slowest recorded in three months amid evidence from the survey panel that ongoing issues with the supply of power had restricted growth (albeit to a lesser degree than seen at times during 2012), it said.
The volume of incoming new work expanded in January, the forty-sixth consecutive monthly increase recorded. Over one-fifth of the survey panel indicated higher levels of new orders, citing stronger demand and maintained product quality. Total new business rose solidly, although growth eased from December. Meanwhile, new export orders increased for the fifth consecutive month, and also at a solid rate. Panel members stated that demand from foreign clients was higher. In line with stronger sales, manufacturers in India increased their input buying in January. The overall rate of growth, although solid, eased to a three-month low.
Commenting on the India Manufacturing PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said: “The growth momentum in the manufacturing sector eased in January as a slower expansion in new orders and power outages slowed output growth. To meet new orders manufacturers still rely on a draw down in stocks of finished good, which should provide support for output growth in coming months as stocks are replenished. Encouragingly input and output price inflation continued to ease, albeit only gradually, supporting the case for RBI's cautious policy rate cut earlier this week.”
A divergence was seen with regards to inventories as stocks of purchases were accumulated, but firms lowered their stocks of finished goods. Pre-production inventories rose for the ninth consecutive month, albeit only slightly. In contrast, post-production inventories were depleted as power shortages hampered production and inventories were used to satisfy demand requirements wherever possible.
Staffing levels in the Indian manufacturing sector increased during January, amid reports of higher workloads. That said, the pace of job creation was slight and unchanged from December. Nevertheless, backlogs of work were accumulated for a further month. Anecdotal evidence suggested that persistent powercuts resulted in higher levels of outstanding business.
Input and output prices both increased in January, with rates of inflation again marked. Input costs rose for the forty-sixth successive month, with respondents indicating that fuel and raw material prices had increased. Output charges were raised to protect margins in the face of higher costs, the HSBC statement said.