Manufacturing PMI signals revival, hits 8-year high of 55.3 in January

The country's manufacturing sector activity climbed to a near eight-year high in January, driven by sharp rise in new business orders amid a rebound in demand conditions that led to rise in production and hiring activity, a monthly survey said on Monday.

Following a sharp improvement in demand, January saw growth of new business, output, exports, input buying and employment. At the same time, business sentiment strengthened and there were softer rises in both input costs and output charges.

The IHS Markit India Manufacturing PMI rose from 52.7 in December to 55.3 in January, its highest level in just under eight years.

"Manufacturing sector growth in India continued to strengthen in January, with operating conditions improving at a pace not seen in close to eight years," said Pollyanna de Lima, Principal Economist at IHS Markit.

This is the 30th consecutive month that the manufacturing PMI has remained above the 50-point mark. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

Companies noted the strongest upturn in new business intakes for over five years, which they attributed to better underlying demand and greater client requirements.

The rise in total sales was supported by strengthening demand from external markets, as noted by the fastest increase in new export orders since November 2018.

On the employment front, hiring activity improved in January, with firms increasing employment at the quickest rate in close to seven-and-a-half years. New business growth and projects in the pipeline were cited as the main reasons for job creation.

Meanwhile, Indian manufacturers were more upbeat about the year-ahead outlook for production. Optimism stemmed from forecasts of better demand, new client wins, marketing efforts, capacity expansion and new product releases.

"To complete the good news, there was also an uptick in business confidence as survey participants expect buoyant demand, new client wins, advertising and product diversification to boost output in the year ahead," Lima said.

On the price front, there were slower increases in both input costs and output charges, the survey noted.

"Companies also benefited from subdued cost pressures, which enabled them to restrict increases in their fees to some extent," Lima said.

The Reserve Bank of India is scheduled to hold its Monetary Policy Committee (MPC) during February 4-6, 2020.