India’s factory activity rose modestly in January after slipping to a two-year low the previous month. A monthly survey on Monday showed the sector was helped by a strong inflow of new orders, while sentiment among manufacturers weakened sharply. The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 55.4 in January from 55 in December. A PMI reading above 50 indicates expansion, while a level below that mark indicates contraction. The survey showed that growth across the region was supported by higher new business, increased production and continued hiring. “Indian manufacturing firms saw a comeback in January led by growth in new orders, production and employment. Input costs increased modestly, while the pace of increase in factory-gate prices slowed, resulting in little pressure on margins for manufacturers,” said Pranjul Bhandari, chief India economist at HSBC. Manufacturers cited a surge in demand, gains in new business and investment in technology as key factors supporting production during the month. Domestic demand remained the major source of sales growth. Export orders also rose, although the pace of expansion remained slow, with companies pointing to better demand from Asia, Australia, Canada, Europe and the Middle East. In terms of employment, companies continued to add workers, although job creation remained limited. The survey described the pace of hiring as “modest”, reflecting the strongest increase in employment seen in the past three months. However, confidence about future activity deteriorated further. Business optimism fell to its lowest level in three and a half years, with only 15 percent of respondents expecting output to rise next year, while 83 percent anticipated no change. “Despite a sharp increase in new orders, business confidence remains subdued, and expectations for future production have fallen to their lowest level since July 2022,” Bhandari said. The price trend during the month was mixed. Input costs rose at the fastest rate in four months, while inflation in selling prices fell to a 22-month low. “Although excise duty increased, the inflation rate was modest and the weakest in almost two years. “Many companies suggested that improved efficiency, better cost management and market competition have prevented them from increasing their fees,” the survey said. The HSBC India Manufacturing PMI is prepared by S&P Global using the responses of purchasing managers of approximately 400 manufacturing companies. The survey panel is structured according to industry segment and size of the workforce, commensurate with their contribution to India’s GDP.
