Manufacturing PMI Increases to 54.7 in April Amid Rising Input Costs Due to Iran Conflict
India’s manufacturing sector showed signs of a mild recovery in April, with improvements in new orders and output, although the growth rate remained one of the slowest in nearly four years. The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) increased to 54.7 from 53.9 in March, indicating continued expansion. However, this marks the second-slowest improvement in operating conditions in close to four years, according to a report by PTI.
Manufacturing PMI Shows Incremental Growth
The HSBC India Manufacturing PMI rose to 54.7 in April, reflecting a slight uptick from March’s 53.9. A PMI reading above 50 signifies expansion, while a reading below indicates contraction. Pranjul Bhandari, Chief India Economist at HSBC, noted that while the index indicates growth, it also highlights the sluggish pace of improvement in the manufacturing sector. The survey results revealed that growth in new orders and output strengthened compared to March, although both metrics remained below levels seen over the past three-and-a-half years.
Factors Influencing Growth
Participants in the survey attributed the growth in sales and production to effective advertising and resilient demand. However, they also pointed out several constraints, including competitive pressures, the ongoing conflict in the Middle East, and delays in client approvals. Bhandari emphasized that the effects of the Middle East conflict are becoming increasingly apparent, particularly through rising inflation. Input costs surged at their fastest rate since August 2022, while output prices increased at the quickest pace in six months. Despite these challenges, the manufacturing sector showed resilience, with moderate growth in output, new orders—including exports—and employment.
Export Orders and Rising Costs
April marked a significant increase in new export orders, reaching a seven-month high. Firms reported heightened demand from various international markets, including Australia, France, Japan, Kenya, mainland China, Saudi Arabia, the UAE, and the UK. On the cost front, manufacturers noted rising prices for essential materials such as aluminum, chemicals, electrical components, fuel, leather, petroleum products, and rubber. Many of these price increases were attributed to the ongoing conflict in the Middle East. The survey indicated that input costs rose at the fastest pace in 44 months, prompting manufacturers to adjust their selling prices accordingly.
Employment Trends and Future Outlook
Despite only a marginal increase in outstanding business volumes, firms ramped up hiring, marking the strongest job creation pace in ten months. While manufacturers expressed optimism about future growth, overall confidence dipped from March levels. Expectations for future performance are closely tied to stronger marketing outcomes and the approval of pending projects. The HSBC India Manufacturing PMI is compiled by S&P Global based on feedback from approximately 400 manufacturing firms, providing a comprehensive overview of the sector’s health.
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