India’s manufacturing sector experienced its slowest growth in a year this December, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) slipping to 56.4 from November’s 56.5. This decline indicates a moderation in the expansion of manufacturing activities, though the sector continues to grow.
Key Highlights:
- PMI Reading: The PMI stood at 56.4 in December, marking the lowest point in 12 months. A PMI above 50 signifies expansion, while below 50 indicates contraction.
- New Orders and Production: Both new business orders and production levels saw softer increases, contributing to the overall slowdown.
- Employment: Despite the deceleration, manufacturing employment rose for the tenth consecutive month, with the rate of job creation reaching a four-month high.
- Input Prices: There was a slight easing in the rise of input prices, offering some relief to manufacturers facing cost pressures.
Analyst Insights:
Pranjul Bhandari, Chief India Economist at HSBC, commented on the findings: “India’s manufacturing activity ended a strong 2024 on a soft note amid more signs of a slowing trend, albeit moderate, in the industrial sector. The rate of expansion in new orders was the slowest in the year, suggesting weaker growth in future production.”
Global Demand and Exports:
While total new business growth decelerated, new export orders experienced an uptick, rising at the fastest pace since July. This suggests that international demand provided some support to the sector, even as domestic orders slowed.
Cost Pressures:
Manufacturers reported rising expenses due to increased container, material, and labor costs. However, the rate of input price inflation moderated compared to previous months, indicating a slight easing of cost pressures.
Employment Trends:
The survey highlighted a continued positive trend in employment, with approximately 10% of companies hiring additional staff and less than 2% reducing their workforce. This marks the tenth consecutive month of employment growth in the manufacturing sector.
Future Outlook:
Looking ahead to 2025, Indian manufacturers remain optimistic about increased output, driven by plans for advertising, investment, and expectations of favorable demand. However, concerns about inflation and competitive pressures may temper this optimism.
Conclusion:
Despite the deceleration to a 12-month low, India’s manufacturing sector continues to expand, reflecting resilience amid global economic challenges. The moderation in growth rates suggests that while the sector is on a positive trajectory, it faces headwinds that could impact future performance.
