India's manufacturing growth rebounds in January on domestic demand: PMI

Indian manufacturing activity rebounded in January after losing momentum at the end of last year, according to the latest HSBC India Manufacturing Purchasing Managers’ Index (PMI).

The seasonally adjusted PMI rose to 55.4 in January from a two-year low of 55.0 in December, indicating an improvement in overall operating conditions.

The reading, however, was below the preliminary estimate of 56.8 released in late January.

Manufacturers reported quicker expansions in factory output, new orders, employment and input buying, as demand conditions improved following December’s slowdown.

The consumer goods segment was the strongest performer, while capital goods saw the weakest improvement.

However, the main impetus came from the domestic market. New export orders continued to rise, but at one of the weakest rates in 15 months.

Underlying data indicated that competitive pricing and improved efficiency helped support sales.

Many firms said better cost management and market competition limited their ability to raise prices.

Input costs increased due to higher prices for items such as chemicals, copper, iron, jute, paper, steel and transportation. January also saw a strong upturn in input purchases as firms raised buying levels to meet production needs and guard against potential shortages.

Commenting on the data, Pranjul Bhandari, Chief India Economist at HSBC, said manufacturing firms saw a rebound in January driven by higher new orders, output and employment.

“Input costs rose moderately, while the pace of growth in factory-gate prices eased, resulting in slight margin pressure for manufacturers. Despite faster growth in new orders, business confidence remains muted, and expectations for future output have declined to their lowest level since July 2022,” she said.

Business confidence, however, weakened further, slipping to a three-and-a-half-year low in January.

Only 15% of surveyed companies expect output growth in the year ahead, while 83% anticipate no change, the survey showed.