Manufacturing PMI slips to a 12-month low of 56.4 in Dec

Manufacturing activity declines in December

India’s manufacturing activity closed the year at a 12-month low of 56.4 in December compared with 56.5 a month back, according to a private sector survey released on January 2.

December marks the second consecutive month of decline in activity. The HSBC India Manufacturing Purchasing Managers’ Index had declined in November from a reading of 57.5 in the previous month.

The index, however, averaged over 57.5 in 2024, compared with 56.8 in the previous year.

"India’s manufacturing activity ended a strong 2024 with a soft note amidst more signs of a slowing trend, albeit moderate, in the industrial sector," said Ines Lam, economist, HSBC.

The pace of growth of new orders was the slowest in a year, but there was some positive momentum on the export side.

New export orders rose at the fastest pace since July, according to HSBC.

Producers also breathed some relief on the inflation front, as input inflation declined from the previous month. However, charge inflation rose faster indicating better pricing power for firms.

"Anecdotal evidence showed that demand resilience supported pricing power," HSBC stated in the release.

There was some positive news on the employment front as well, as job creation reached its fastest pace in four months.

"Around one-in-ten companies recruited extra staff, while fewer than 2 percent of firms shed jobs," HSBC stated.

Outlook for the coming year was also stronger, but there were concerns around rising competition and higher inflation.

India's inflation has surprised on the upside, with food inflation showing no signs of cooling off. Vegetable and pulses inflation has remained high throughout the year.

India's inflation eased slightly in November, but remained above 5 percent for yet another month.

"Optimism reflected advertising, investment and expectation of favourable demand. Sentiment was nevertheless curbed by concerns around inflation and competitive pressures," according to HSBC's survey of 400 manufacturers.

The Indian economy slumped in the second quarter, with growth slipping to a seven-quarter low of 5.4 percent.

Manufacturing prospects don't look good with yet another decline in manufacturing PMI.

The PMI reading at 56.8 for the quarter was lower than 57.4 witnessed in the July-September quarter.

India's manufacturing growth had declined to 2.2 percent in Q2FY25 compared with 7 percent in the first quarter of the year.