Manufacturing growth slipped in November to joint 11-month low

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| Photo Credit: N. Bashkaran

Factory activity expansion in India’s private sector fell to a joint-11 month low in November, while firms raised prices at the swiftest pace in over eleven years as input cost pressures began to bite, as per the survey-based HSBC India Manufacturing Purchasing Managers’ Index (PMI) that slipped to 56.5 from 57.5 in October. A reading of over 50 on the index indicates a rise in activity levels.

The 400-odd firms surveyed for the index cited higher outlays on freight, labour and materials that they passed on to clients, as input cost inflation intensified to the highest level since July, with companies naming pricier chemicals, cotton, leather and rubber as important pressure points.

New business orders and production levels increased at a softer pace as favourable demand conditions clashed with fierce competition and price pressures. However, fresh export orders gained pace to surge at the highest pace in four months, with firms reporting gains in orders from Bangladesh, mainland China, Colombia, Iran, Italy, Japan and Nepal, apart from major markets such as the U.S. and U.K. 

Output levels at surveyed factories grew at the slowest pace since December 2023, but employment levels continued to be ramped up for the ninth successive month, albeit at a lower scale than October. Firms reporting hiring staff on both permanent and temporary bases. Incidentally, for the first time since August 2017, factories reported an uptick in their stocks of finished goods, breaking a seven-odd year sequence of such stocks falling every month.

While producers continued to buy additional inputs to build inventories of raw materials, the rise in such purchases was the weakest in just under a year, S&P Global, which conducts the PMI surveys noted. Accumulated stocks thus fell to the weakest level so far in 2024.

“Business optimism was spurred by predictions that marketing efforts and new product releases will bear fruit. Recent capacity expansion efforts and forecasts of demand strength also underpinned upbeat also underpinned upbeat forecasts for output in 2025,” the firm said.

While the PMI reading was down slightly in November, it was still firmly within expansionary territory, and the four-month peak in new export orders led the manufacturing sector’s growth in November, said Pranjul Bhandari, chief India economist at HSBC. 

“The rate of output expansion is decelerating due to intensifying price pressures. Input prices for a variety of intermediate goods — including chemicals, cotton, leather, and rubber — rose in November, while output prices soared to an eleven-year high as rising input, labour, and transportation costs were passed on to consumers,” she reckoned.