The seasonally adjusted HSBC Purchasing Managers’ Index (PMI) for India – a headline index designed to measure the overall health of that country’s manufacturing sector – posted 58.4 in November, rising from October’s reading of 57.2. The latest PMI pointed to a marked expansion of the Indian manufacturing sector. The rate of growth accelerated for a second successive month and was above the long-run average for the series.
Incoming new business received by manufacturers in India increased substantially during November. Moreover, the latest expansion in new order volumes was the strongest in four months. Panelists also indicated a marked rise in new export business during the month. Growth of new work intakes received from overseas markets increased sharply from October’s 11-month low to the fastest since January.
The steep expansion in overall new order volumes drove a further rise in output. The latest growth in production was the strongest in nine months, and robust in the context of historical data. Nonetheless, backlogs of work continued to increase, with November’s accumulation of outstanding business in line with the series high recorded in June. Stocks of finished goods rose for a second successive month in November. However, the increase was marginal, with the majority of panelists noting that post-production inventories were unchanged since October.
Despite sharp rises in new orders and output, and a further accumulation of backlogs, employment in the Indian manufacturing sector decreased slightly in November. While some manufacturers were aiming to increase employment to boost capacity levels, other companies were finding that staff were leaving for higher wages elsewhere.
Purchasing activity at manufacturers increased markedly in November, contributing to a record deterioration in vendor performance. Panelists also commented that shortages of certain materials had added to the delays. Stocks of purchases also increased during the month.
November data signaled a substantial rise in input prices faced by manufacturing companies in India. An increase in raw material prices drove the latest rise in costs, which was the fastest in six months. Charges also increased in November, with output price inflation now sustained since September 2009.
Commenting on the India Manufacturing PMI survey, Leif Eskesen, chief economist for India & ASEAN at HSBC, said: “The momentum in manufacturing picked up further in November. Output accelerated and growing order books point to a continued strong momentum in the months ahead. A spike in backlogs of works suggest tight capacity, which together with rising input and output prices underscores the need for continued monetary policy tightening by the Reserve Bank of India.”
