The April Manufacturing Purchasing Managers’ Index (PMI) survey has brought good news. The month saw a pick-up in business activity by Indian manufacturers. The seasonally adjusted S&P Global India Manufacturing PMI rose to 57.2 in April from 56.4 in March. A reading above 50 indicates expansion. In fact, April’s headline index print is the highest ever in 2023. This was helped by strong new orders, increased production and easing supply chain pressure.
Among other highlights, new orders grew at the fastest pace since last December, the survey report said, adding that “the rate of expansion was brisk and well above its long-term average.” Demand power and publicity, according to respondents.
But one should not get too excited. “From a sentiment perspective, demand appears to be at a better level given the improvement in various PMI sub-components such as new orders, exports and production,” said Rahul Bajoria, managing director and head, EM Asia (ex-China). ) Economics, Barclays. However, he added that it remains to be seen how the actual data (industrial production, growth of core industries and exports) ends up as there have been gaps between the PMI survey and the actual data, especially on exports.
The International Monetary Fund (IMF) recently lowered its global economic growth forecast for this year citing broad-based and sharper than expected slowdown amid high inflation. It also cut India’s growth forecast for FY24. On inflation, manufacturers pointed to higher operating costs on account of fuel, metals, transportation and some other raw materials. It is worth noting here that global oil prices rose in early April following production cuts by the Organization of the Petroleum Exporting Countries. Therefore, the sub-index measuring input costs rose in April to March; However, the overall rate of inflation remained below the long-term average, the report said.
However, there was marginal improvement in selling prices. The sub-index measuring output prices rose to a three-month high in April, matching its long-term average. Despite good demand, the weak pricing power of the manufacturers has been a matter of concern. But output prices rose at a slower pace than input prices in April, providing limited relief. Only 6% of companies increased their fees since March while 92% left them unchanged.
Gaura Sen Gupta, Economist, IDFC First Bank, said, “From an inflation perspective, the manufacturing survey indicates modestly rising inflationary pressures, but also shows that core inflation is likely to remain firm, with demand conditions remaining strong. “
Inflation measured through the Consumer Price Index (CPI) eased to a multi-month low of 5.66% in March, aided by lower prices of vegetables. The latest reading is a relief as it is below the RBI’s upper tolerance limit of 6%. Sen Gupta said, “We expect CPI inflation to average 5.5% in FY24, so we expect RBI to be on standstill till December 2023.” marketing efforts.
Pollyanna De Lima, associate director of economics at S&P Global Market Intelligence, said, “In addition to seeing the strongest inflow of new work ever in 2023, capacities were expanded through job creation, increased input purchases and pre-production inventory grew at a record rate.” As a result, the PMI gauge of business optimism rebounded in April from an eight-month low in March. Bajoria said.
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