Improved output pushes India's manufacturing PMI to 3-month high in March

India's manufacturing activity rose to its highest since January in March. Compared with 55.3 in February, the Manufacturing Purchasing Managers' Index compiled by S&P Global increased to 56.4. However, the PMI average of the final quarter of 2022-23 (Q4FY23) at 55.7 was below 56.3 in Q3FY23. 

The main reasons for the rise are improved output and new orders, although firms shed jobs for the first time in over a year.

"Underlying demand for Indian goods remained strong in March, underscored by the quickest upturn in factory orders for three months. Hence, production continued to expand at a robust clip and firms stepped up their stock building efforts," said Pollyanna De Lima, Economics associate director at S&P Global Market Intelligence.

The new orders sub-index, which tracks overall demand, rose last month and foreign demand expanded at a quicker rate from February. Output grew at the strongest pace since December.

However, that improvement did not translate to increased hiring as job market conditions darkened, slipping back into contraction for the first time in 13 months although the pace of job shedding was minimal.

Optimism about future output slipped to an eight-month low due to concerns surrounding competitiveness and general inflation.

While input cost inflation retreated to its second-lowest mark in 2-1/2 years, firms did pass on some of the pressures of greater labour and raw material costs to customers. The output prices sub-index rose to 52.0 from 51.8.

That would likely keep retail inflation elevated over the coming months.

"Although manufacturers were upbeat towards future new orders, they somewhat doubted that inflation would continue to recede. Such worries restricted optimism towards output prospects," De Lima said.

(With agency inputs)