India’s manufacturing sector experienced a significant upswing in February, reaching a five-month high propelled by strong demand both domestically and internationally.
Expansion in Manufacturing Activity
According to the monthly survey conducted by HSBC, the Purchasing Managers’ Index (PMI) for India’s manufacturing sector rose from 56.5 in January to 56.9 in February. This surge signifies the most robust improvement in the sector’s health since September 2023. In PMI terminology, a reading above 50 indicates expansion, while a score below 50 suggests contraction.
Factors Driving Growth
The survey highlights that production saw the fastest growth in five months, contributing to a notable increase in sales since September and the strongest expansion in new export orders in 21 months. Ines Lam, an Economist at HSBC, emphasized that the growth momentum was supported by both domestic and international demand.
Employment and Inflation Trends
Despite the surge in growth, manufacturing employment remained largely unchanged, with firms reporting that current payroll numbers were adequate. However, there was a significant decline in purchasing cost inflation, reaching a 43-month low. This led to a lesser increase in selling charges, with input costs rising at the slowest pace in over three-and-a-half years.
Optimistic Business Outlook
Manufacturers exhibited optimism regarding future business conditions, driven by buoyant demand and improving profit margins. The survey indicated sustained confidence among manufacturers for the year-ahead outlook, marking the second-highest level since December 2022.
International Demand and Outlook
Notably, new export orders surged at the fastest rate in nearly two years, with several countries including Australia, China, Europe, and the US contributing to demand growth. Manufacturers responded to increased production requirements by scaling up buying levels and building safety stocks.
Conclusion
Overall, the HSBC India Manufacturing PMI underscores the resilience and optimism within India’s manufacturing sector, buoyed by robust domestic and international demand. With improving profit margins and positive growth prospects, manufacturers maintain a bullish outlook for the future.
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