India's manufacturing sector growth falls to 18-month low in December on softer rise in orders, output

New Delhi: India’s economic expansion seems to have lost momentum towards the end of the 2023 calender year with manufacturing output growth slipping to an 18-month low in December dragged by weak demands, an industry survey by S&P Global showed. 

India’s Purchasing Managers’ Index (PMI) for manufacturing dipped to 54.9 in December from 56 recorded in the previous month. 

The growth in the manufacturing sector was “curbed by fading demand for certain types of products,” S&P Global noted in its monthly survey report released on Wednesday. 

The pace of output expansion was the slowest seen in a year-and-a-half.

“India’s manufacturing sector continued to expand in December, although at a softer pace, following an uptick in the previous month,” said Pranjul Bhandari, Chief India Economist at HSBC. 

“Growth of both output and new orders softened, but on the other hand, the future output index rose since November. Rates of increase in input and output prices were broadly unchanged,” Bhandari added. 

The PMI print above 50 indicates growth in the sector while below 50 shows contraction. Manufacturing PMI has been above 50 for 30 months in a row. Despite the weakening in growth, December PMI reading was above the long-run series trend. 

December data showed a twenty-first consecutive increase in international order receipts at goods producers in India. Companies noted gains from clients in Asia, Europe, the Middle East and North America. New export sales expansion slipped to the lowest in eight months. 

Inflation eased sharply. Input costs inflation declined to nearly three-and-a-half years low while charge inflation was the lowest in nine months. Among the items reported to have been up in price were chemicals, paper and textiles. The rate of inflation was little changed from November. It was negligible by historical standards and lowest in around three-and-a-half years. 

Taking advantage of the decline in costs, companies increased input inventories. “The key determinant of rising input inventories was a sustained increase in buying levels. Quantities of purchases expanded throughout the latest two-and-a-half years,” S&P Global noted in the report. 

The PMI data is based on a survey of around 400 manufacturers spread across the country. 

Employment was largely stable in December, with the respective seasonally adjusted index registering only fractionally above the 50 no-change mark, the report showed. This means there was hardly any new hiring.