Manufacturing sector is picking up pace as Purchasing Managers’ Index (PMI) improved to 55.7 in November against 55.3 in October, S&P Global said on Thursday.
Recovery in manufacturing is critical as government on Wednesday reported GDP growth slowing down to 6.3 per cent during July-September quarter (Q2) mainly on account of poor performance of manufacturing and mining sectors. Performance of manufacturing is also important as it is considered as a job multiplier.
Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence said India’s manufacturing sector continued to perform well in November despite recession fears elsewhere and a deteriorating outlook for the global economy.
Goods producers lifted production volumes to the greatest extent in three months amid demand resilience. New orders and exports expanded markedly in the latest month.
November PMI shows the strongest improvement in operating conditions for three months. PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. Based on the responses, index is prepared. Reading above 50 shows expansion while below 50 means contraction.
November data highlighted a seventeenth successive expansion in manufacturing production across India, as companies responded to ongoing increases in new work intakes. The upturn in output was sharp, above trend and the strongest since August. New orders and production rose at quicker rates in the consumer and intermediate goods categories, with slowdowns registered at capital goods makers. Companies readjusted operating capacities in line with a pick-up in sales. Employment rose solidly, and for the ninth month in a row, S&P Global noted.
According to De Lima, survey participants were confident in both the buoyancy of demand for their goods and their ability to further lift production in 2023. The level of positive sentiment recorded in November was the best in nearly eight years.
“Companies were also aided by a substantial cooling of cost pressures in November, a factor that prompted them to purchase more inputs and add to their inventories. The overall rate of input cost inflation slipped to the joint-lowest in 28 months. Buyers of Indian manufactured goods likewise gained from this retreat in cost inflation, as 92 per cent of surveyed firms left their selling prices unchanged from October,” she said.
However, respondents said that there remained signs of capacity pressures among manufacturers, as seen by a further increase in outstanding business levels. That said, the rate of accumulation eased from October and was modest. Firms were confident that demand would remain strong in the coming 12 months. As a result, they foresee growth of production volumes. Sentiment improved to its highest level in close to eight years, S&P Global concluded