S&P Global India Manufacturing PMI indicates producers passed costs on to consumers at the fastest pace in a year
S&P Global India Manufacturing PMI indicates producers passed costs on to consumers at the fastest pace in a year
According to the S&P Global India Manufacturing Purchasing Managers’ Index (PMI), India’s manufacturing sector posted a spurt in new orders and output in April, rising from 54 in March to 54.7 last month, even as inflation slowed down. The pressure also intensified. A reading of 50 on the index indicates no change in business activity levels.
New export orders resumed in April after a fall in March, but consumer goods producers reported contraction during the month. Rising commodity prices pushed up input costs at the fastest pace in five months, while the rate at which producers passed on higher costs to consumers was the fastest in a year.
While there was some improvement in business confidence levels in the first month of the financial year, overall optimism remained weak as many firms said it was difficult to predict the coming year. Most producers did not change their workforce in April, but some reported modest increases, mainly because firms are still operating below their current capacity limits.
“A key insight from the latest results was the intensification of inflationary pressures, as volatility in energy prices, global shortages of inputs and the war in Ukraine drove up procurement costs,” said Polyana de Lima, economics associate director at S&P Global.
The companies responded by increasing their fees the most in a year. “This increase in price pressures could dampen demand as companies continue to share the additional cost burden with their customers,” he said, stressing that expectations about growth prospects remain low.
With chemical, electronic components, energy, metals, plastics and textile costs reportedly higher compared to March, firms indicated a further increase in input costs during April. S&P Global said in a statement that the increase was partly attributable to rising transportation tariffs and the war in Ukraine and that the overall rate of inflation rose to a five-month high and outpaced its longer-term trend.
Despite higher costs, firms accelerated input procurement in April at the fastest pace since November 2021, according to PMI, which was compiled based on responses to questionnaires sent to purchasing managers in a panel of nearly 400 manufacturers Is.
“The additional cost burden continued to be shared with consumers in April, as evidenced by a further increase in selling prices. Inflation was solid and the fastest in a year,” S&P Global said.