Manufacturing PMI Expands In April Despite Inflationary Pressures

A gauge of activity across India’s manufacturing sector continued to expand even as pricing pressures intensified.

The India Manufacturing Purchasing Managers’ Index stood at 54.7 in April against 54 in March, according to a media statement by IHS Markit. A reading above 50 indicates economic expansion.

A pickup highlighted a “solid and faster improvement” in operating conditions across the sector, it said. Growth gathered momentum in the intermediate and capital goods segments, but there was a slowdown at consumer goods makers.

The retreat of Covid-19 restrictions continued to support demand. New order growth was marked above trend and faster than that seen in March. Output growth also quickened in April and outpaced its long-run average.

Export orders rebounded in April after the first contraction in nine months in March. The rate of increase was the strongest since July.

Firms signaled an upturn in input costs during the month, with chemical, electronic component, energy, metal, plastic and textile costs reportedly higher than in March. The increases were partly attributed to rising transportation fees and the war in Ukraine. The overall rate of inflation strengthened to a five-month high and outpaced its long-run trend.

“A major insight from the latest results was an intensification of inflationary pressures, as energy price volatility, global shortages of inputs and the war in Ukraine pushed up purchasing costs,” Pollyanna De Lima, economics associate director at S&P Global, said. “Companies responded to this by hiking their fees to the greatest extent in one year. This escalation of price pressures could dampen demand as firms continue to share additional cost burdens with their clients.”

Additional cost burdens continued to be shared with consumers in April.

India’s manufacturing PMI in April indicates that economic activity is holding up despite greater headwinds to growth as cost pressures mount. Still, risks to GDP growth remain biased to the downside, Rahul Bajoria, chief economist at Barclays, said.

The rising cost of fuel, power shortages and a likely hit to profitability amid rising input costs will weigh on the domestic recovery, he said in an emailed statement.

According to IHS Markit statement, there was some improvement in business confidence at the start of FY23. But the overall degree of optimism remained subdued by historical standards. Some firms foresee improvements in demand and economic conditions, while others noted that the year-ahead outlook was difficult to predict.