HSBC India manufacturing PMI unchanged in April 2014

HSBC says build-up in finished goods inventories could weigh on output growth in coming months

HSBC's India manufacturing PMI was unchanged at 51.3 in April 2014 same as in March 2014. However, output growth (51.7 vs. 52.2 in March) slowed and new orders (52.5 vs. 52.7 in March) moderated slightly, with firmer domestic demand countering a slowdown in new export orders (53.0 vs. 56.8 in March).

Despite the broadly steady output and order growth, the quantity of purchases (53.0 vs. 51.7 in March), stocks of purchases (52.4 vs. 49.9 in March) and stocks of finished goods (52.7 vs. 51.4 in March) rose at a faster pace. This could weigh on output growth in the coming months if demand does not pick up pace.

 

Backlogs of work (51.2 vs. 53.0 in March) is still rising, but at a slower pace, and supplier delivery timeliness (51.1 vs. 50.5 in March) improved. Meanwhile, employment was broadly unchanged (50.2 vs. 50.2 in March).

Meanwhile, inflation cooled notably for input prices (54.6vs. 57.2 in March) and was marginally lower for output prices (50.9 vs. 51.0 in March).

Leif Lybecker Eskesen, Chief Economist for India & ASEAN, HSBC, said, "the momentum in the manufacturing sector held broadly steady in April, with a slowdown in export orders countered by firmer domestic demand. However, a build-up in finished goods inventories could weigh on output growth in coming months in the absence of a pickup in total demand. Encouragingly, inflation pressures eased, but that does not mean that the RBI can take down its inflation guards."

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