India's Manufacturing Activity Accelerates To 14-Month High As Exports Surge In June
The HSBC India Manufacturing Purchasing Managers' Index, compiled by S&P Global, rose to 58.4 in June from May's 57.6. The headline figure was above its long-run average of 54.1 and pointed to a substantial improvement in the health of the sector.
'Companies also welcomed one of the fastest increases in external orders in over 20 years of survey history. Goods producers lifted input buying to the greatest extent in 14 months, which supported a further expansion in stocks of purchases," the survey stated.
Production volumes increased at the fastest pace since April 2024, fuelled by efficiency gains, demand and greater sales volumes. The acceleration was led by intermediate goods makers, however, with slowdowns in the consumer and capital goods segments.
"Growth of new export orders gained considerable momentum in June. The rate of expansion was the third-highest since data collection started in March 2005. Firms noted strengthening demand from across the globe, with the US mentioned more frequently," said the survey.
Having stagnated in May, outstanding business volumes increased in June. Coupled with robust sales, this boosted hiring among manufacturers. Employment rose at a survey-record pace, with panellists mostly pointing to short-term recruitment.
"Robust end-demand fuelled expansions in output, new orders, and job creation," said Pranjul Bhandari, chief India economist at HSBC.
"To keep up with strong demand — particularly from international markets, as evidenced by the substantial rise in new export orders — Indian manufacturing firms had to tap deeper into their inventories, causing the stock of finished goods to continue shrinking. Finally, input prices moderated while average selling prices rose as some manufacturers passed on additional cost burdens to clients," she added.
Meanwhile, input price inflation fell to a four-month low, despite rising iron and steel costs as the rate of increase was negligible relative to the series average. 'Average selling prices rose markedly, however, as several firms sought to share additional cost burdens (freight, labour and materials) with their clients. In some instances, companies attributed upward revisions to demand buoyancy," the survey states.
Employment increased at a record pace, with most survey panellists recording short-term recruitment. The outlook for the Indian manufacturing sector remained positive in June. That said, uncertainties surrounding competition, inflation and changes in consumer preferences weighed on sentiment, the survey added.
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