India's Manufacturing Growth Hits 18-Month Low in December: A Year-End Recap

Introduction:

As the year came to a close, India's manufacturing sector faced headwinds, experiencing an 18-month low in growth during December 2023. The latest data, compiled by S&P Global in the HSBC India Manufacturing Purchasing Managers’ Index, sheds light on the challenges faced by the industry as it navigated a slowdown in new orders and output.

India's manufacturing output hit an 18-month low in December.

Decoding the Numbers:

In December, the Manufacturing PMI dipped to 54.9, down from 56 in November. Despite this decline, the sector managed to stay above the crucial 50-mark, signifying expansion rather than contraction. Notably, the output rose at the slowest pace in 14 months, indicating a challenging landscape for manufacturing.

Expert Insights:

Pranjul Bhandari, Chief India Economist at HSBC, offered insights into the situation. "India's manufacturing sector continued to expand in December, although at a softer pace, following an uptick in the previous month," she remarked. Bhandari highlighted that the growth of both output and new orders had softened. However, a glimmer of optimism emerged as the future output index showed improvement since November.

Factors at Play:

The survey pointed to softened demand in December, with the new orders sub-index falling to 57.3 since June 2022. Simultaneously, international demand weakened, leading to a six-month low in export growth. This, in turn, impacted hiring activity, which increased at the slowest rate in nine months.

Cost Dynamics:

Both input costs and prices charged saw marginal changes compared to the previous month. Notably, the pace of output inflation outpaced that of input prices for the fourth consecutive month. This suggests that factories were passing on additional costs to consumers, reflecting the delicate balance manufacturers face in managing their bottom line.

Conclusion:

As the manufacturing sector grapples with challenges, the close of 2023 serves as a reminder of the need for resilience and adaptability. The softer pace of growth in December underscores the importance of monitoring and responding to market dynamics. The industry's ability to navigate these challenges and make strategic adjustments will be crucial for a robust resurgence in the coming months. The new year brings fresh opportunities for the manufacturing sector to rebound and regain momentum on the path to sustained growth.