India's factory growth slows in June
What's the story
India's manufacturing sector has witnessed its second-slowest growth in four years, according to a recent survey. The slowdown is mainly due to a decline in demand for goods, which has affected output and hiring. The HSBC India Manufacturing Purchasing Managers' Index (PMI) fell from May's reading of 55 to 54.2 in June. This was the second-lowest reading since mid-2022, behind only March.
Demand dip
New orders rose at their 2nd-weakest rate since June 2022
The survey also revealed that new orders, a key demand indicator, rose at their second-weakest rate since June 2022. This was after hitting a three-month high in May. Export orders were even softer with international sales growing at the weakest pace in 39 months due to subdued demand from European clients.
Production slowdown
Output growth slows down
The survey also noted a slowdown in output growth, which expanded at its second-slowest rate since mid-2022. This was mainly due to capital goods dragging the pace down. As demand slowed, firms were more hesitant to raise prices with output charges rising at their slowest rate in three months. A whopping 93% of companies kept fees unchanged from May amid easing cost pressures but continued higher prices for chemicals, metals, petroleum products, and plastics.
Job market
Employment grew at its weakest pace this year
The softer demand environment has also affected hiring in India's manufacturing sector. Employment grew at its weakest pace this year with 97% of firms keeping headcount unchanged due to adequate capacity. Concerns over demand and market conditions have pushed business confidence down to a five-month low, further highlighting the challenges facing India's manufacturing sector amid cooling demand for goods.