Manufacturing PMI at 4-month high in April on robust demand for new orders

Producers have 'abundant opportunities to keep powering ahead': S&P survey

India’s purchasing managers’ index (PMI) for manufacturing in April increased to a four-month high of 57.2 from 56.4 in March, driven by new orders and output, said a private survey on Monday.

“Several indices pointed to more favourable operating conditions across India’s manufacturing industry in April. Factory orders and production rose at the strongest rates in 2023 so far, companies stepped up input purchasing owing to stock-replenishment efforts,” said the survey by S&P Global.

A survey print above 50 indicates expansion in manufacturing, and below marks contraction.

The March data pointed to a consecutive 22-month rise in manufacturing production.

The survey said the input cost inflation accelerated again, but the latest upturn was mild by historical standards and the output charges increased at a moderate rate that matched its long-run average

“Although manufacturers signaled higher operating costs in April — linked to fuel, metals, transportation, and some other raw materials — the overall rate of inflation remained below its long-run average despite quickening since March,” it said.

Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said production growth improved in April, reflecting a robust and quicker expansion in new orders. Companies benefited from relatively mild price pressures, better international sales, and improving supply-chain conditions.

“It seems like Indian manufacturers have abundant opportunities to keep powering ahead. Besides seeing the strongest inflow of new work in 2023 so far, capacities were expanded through job creation, input buying was lifted and pre-production inventories rose at a record rate. At the same time, stocks of finished goods need replenishing as some orders were reportedly fulfilled from warehoused goods,” she said.

More jobs were created, but the improvement was slight after a fractional reduction in March. “Despite the surge in purchasing activity, suppliers were able to deliver inputs in a timely manner during April. Vendor performance improved to the greatest extent in eight months, though only slightly overall,” the survey said.

In contrast to the trend for input stocks, holdings of finished products decreased in April and the pace of depletion was moderate, though the fastest in four months. Wherever a contraction was signaled, monitored firms mentioned that sales had been fulfilled from warehoused items.

“Manufacturers are certainly upbeat towards growth prospects, with optimism improving from March’s eight-month low on the back of contracts pending approval, rising client enquiries, marketing initiatives and evidence of demand resilience,” De Lima said.

Rahul Bajoria, chief economist at Barclays, said the latest manufacturing PMI data indicates that activity in India remains on a strong footing as domestic demand remains robust.

“Some moderation is becoming visible in areas such as electricity consumption, cement production, and infrastructure index, partly on account of high base effects, but also given some sequential weakness, especially in electricity consumption. Still, we expect India to remain an outlier amid the global slowdown. Given resilient domestic demand and a sharp improvement in external metrics, (expected) GDP growth forecast for FY2023-24 is 6.3 per cent (earlier 6 per cent), versus 7 per cent estimated in FY23,” he said.