PMI hits 5-month high in Feb on robust demand
New export orders expanded at the strongest rate in 21 months during Feb
India’s manufacturing activity hit a five-month high in February, driven by a sharp uptick in orders and lower input costs, a private survey said on Friday.
According to the HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, India Manufacturing Purchasing Managers’ Index (PMI) rose to 56.9 in February from 56.5 in January, recovering from an 18-month low of 54.9 in December.
A reading above 50 separates expansion from contraction.
The February reading is slightly higher than 56.7 estimated by HSBC in its Purchasing Managers’ Index for the Indian manufacturing sector.
While production rose at the fastest pace in five months during February, fuelled by the quickest increase in sales since last September, new export orders expanded at the strongest rate in 21 months during the month, the survey said.
Production levels were raised following a steep increase in inflows of new orders amid buoyant demand conditions. The upturn in manufacturing output was led by the capital goods category, it added.
Interestingly, the second advance estimate released by the statistics ministry on Thursday showed that India’s economy may expand 7.6% in FY24 amid strong investment growth in plant and machinery, robust manufacturing growth, and a slight improvement in trade, even as consumption and government spending seeing a slower pace than previously estimated. In January, the ministry had forecast a 7.3% growth in the fiscal.
“The HSBC final India Manufacturing PMI indicates that production growth continued to be strong, supported by both domestic and external demand. Manufacturing firms’ margins improved as input price inflation slipped to the lowest since July 2020,” said Ines Lam, Economist at HSBC.
“Buoyed by robust demand and improving profit margins, manufacturers have an optimistic outlook about future business conditions,” Lam added.
The latest PMI numbers, based on a survey of 400 manufacturers, follow data that showed that the Indian economy grew at an impressive 8.4% in the December quarter on the back of higher government spending, strong investment growth in plant and machinery, robust manufacturing growth and a slight improvement in trade.
“Notably, new export orders rose at the fastest rate in nearly two years, with anecdotal evidence highlighting Australia, Bangladesh, Brazil, Canada, mainland China, Europe, Indonesia, the US and UAE as sources of demand growth,” the survey said.
“Similarly, factory orders expanded at the quickest pace since September and one that was above the long-run series average. Firms indicated that marketing efforts continued to bear fruit, helped by a positive demand environment,” it added.