As the output growth slowed, manufacturing-related Purchasing Managers’ Index (PMI) dropped to 58.8 in April as against 59.1 in March. However, the good news is that job creation was good.

“April’s manufacturing PMI recorded the second fastest improvement in operating conditions in three-and-a-half years, bolstered by strong demand conditions which resulted in a further expansion of output, albeit slightly slower than in March,” Pranjul Bhandari, Chief India Economist at HSBC, said. The PMI, prepared and S&P Global and christened as HSBC PMI, is released much in advance of the government data and gives a quick insight of industrial activity in private sector. The index is prepared on the basis of responses from purchasing executives of 400 companies.

Manufacturing is key in job creation and is considered as job multiplier. Empirical pieces of evidence show one job created in the manufacturing sector could lead to over 2 jobs created in other sectors. That is why, the PMI manufacturing report also highlights the pace of job creation. Talking about April, the report said, to fulfil current and expected improvements in demand, manufacturers hired additional staff at the start of the first fiscal quarter. “The pace of job creation was moderate, but nevertheless the quickest since September 2023,” it said while adding that pressure on operating capacities remained mild as evidenced by a slight uptick in outstanding business volumes.

On the issue of inflation and prices of goods, the report said that although the latest results showed an intensification of cost pressures during April, the rate of inflation remained below its long-run average. Among the items mentioned as up in price were aluminium, paper, plastics and steel. Amid reports of higher material and labour costs, Indian manufacturers increased their selling prices in April. “The rate of charge inflation quickened to a three-month high, converging to its long-run average,” it said.

Bhandari noted that improvements in suppliers’ delivery times contributed to increased purchasing activity. Additionally, a positive outlook for the year ahead prompted firms to expand their staffing levels. On the price front, higher costs of raw materials and labour led to a modest uptick in input costs, but inflation remains below the historical average. However, “firms passed these increases onto consumers through higher output charges, as demand remained resilient, resulting in improved margins,” she said.

Data for industrial growth for the month of April, based on the Index of Industrial Production (IIP) will be released next month on the 12th. The industrial growth in February 2024 rose to 5.7 per cent, partly benefitting from the extra day in the leap month. The disaggregated data was quite mixed, ranging from a contraction of 3.8 per cent in consumer durables and a double-digit expansion of 12.3 per cent in consumer durables in February.