India's manufacturing sector rebounds but cost pressures hit 44-month high
What's the story
India's private sector manufacturing activity witnessed a recovery in April, after hitting a four-year low in March. The rebound was mainly driven by a sharp increase in export orders, as per data from S&P Global. The HSBC India Manufacturing Purchasing Managers' Index (PMI), which tracks monthly changes in manufacturing output, rose to 54.7 last month from March's 53.9.
Growth indicators
PMI reading marks 54th consecutive month of expansion f
The PMI reading, a weighted average of new orders, output, employment, suppliers' delivery times and stocks of purchases indices, remained above the 50 mark. This indicates that activity is expanding rather than contracting. The latest figure was lower than last month's Flash India Manufacturing PMI of 55.9 but still marks the 54th consecutive month of expansion for India's manufacturing sector.
Market hurdles
PMI still lower than levels witnessed in 3.5 years
The PMI reading is still lower than levels witnessed in at least three-and-a-half years. The survey attributes this to competitive conditions, the West Asia war, and a reluctance among clients to approve pending quotes. "Spillovers from the Middle East conflict are becoming more evident, particularly through inflation: input costs increased at the fastest pace since August 2022, and output prices rose at the quickest rate in six months," Pranjul Bhandari, Chief India Economist at HSBC, said.
Cost pressures
Input costs rose at fastest pace since August 2022
Bhandari noted that input costs have risen at the fastest pace in four years. This is largely due to higher prices of aluminium, chemicals, electrical components, fuel, leather, petroleum products and rubber. The survey found that average cost burdens rose further in April amid these price hikes. However, new export orders surged at the fastest pace in seven months while companies hired more workers at their fastest pace in 10 months as part of expansion plans.