Manufacturing Ends 2023 At 18-Month Low Amid Weaker New Orders, Output
India's manufacturing sector concluded 2023 with a somewhat uncertain outlook as factory growth decelerated to an eighteen-month low in December, revealed by a business survey released on Wednesday.
The HSBC India Manufacturing Purchasing Managers' Index, produced by S&P Global, dipped to 54.9 in December from November's 56.0. Nevertheless, the index remained above the 50-mark, indicating expansion for the 30th consecutive month.
Pranjul Bhandari, HSBC's Chief India Economist, noted that while India's manufacturing sector continued its expansion in December, the pace softened compared to the previous month. Both output and new orders saw slower growth, although the future output index rose since November.
Despite this, manufacturers expressed optimism about the upcoming year, attributing it to improved customer relations and new inquiries, as per the survey.
However, demand exhibited a slight softening last month, with the new orders sub-index dropping to 57.3, the lowest since June 2022. Simultaneously, output saw its slowest increase in 14 months.
International demand also showed less vigour, evidenced by export growth slowing to a six-month low, impacting hiring, which saw its slowest rate of increase in nine months.
The survey indicated that while both input costs and prices charged remained relatively stable compared to the previous month, the pace of output inflation exceeded that of input prices for the fourth consecutive month. This suggested that factories could still pass on additional costs to customers.
Regarding monetary policy, the Reserve Bank of India wasn't anticipated to initiate policy easing until the quarter ending September, aligning with the projected time for inflation to reach the central bank's medium-term target of 4 per cent.
