India's Manufacturing PMI Improves To 58.3 In June As Employment Generation Hits Fresh Peak

The companies clocked the fastest growth rate seen in employment generation in over 19 years. As such, the PMI stood comfortable past its long-run average

PMI: India’s manufacturing sector witnessed a slight recovery in its growth in June as the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) improved to 58.3 in the month under review.

The survey, compiled by S&P Global, revealed that the manufacturing PMI stood at 57.5 a month earlier in May. The domestic manufacturing sector managed to recover some of its ground lost in May as the data for June revealed strong demand conditions helped promote an expansion in new orders, output, and buying levels.

The companies clocked the fastest growth rate seen in employment generation in over 19 years. As such, the PMI stood comfortable past its long-run average.

“Manufacturing output increased at a sharp pace that was faster than in May, as underlying demand remained favourable and new business continued to flow in. The performance of the consumer goods industry was especially strong, although substantial increases were also noted in the intermediate and investment goods categories. June saw a stronger expansion in sales at manufacturers in India. Buoyant underlying demand, higher export volumes and successful advertising all fuelled growth, anecdotal evidence showed,” the survey noted.

Employment Generation

A surge in new order intakes resulted in an increase in recruitment from the firms. The rate of job creation remained sharp and the strongest seen since March 2005. Staff expenses also increased in June. This along with a rise in material and transportation costs led to an overall jump in operating expenses. 

Outlook

The outlook for the sector remained positive as about 29 per cent of the panellists said that they estimated a growth in output over the year. The companies projected more improvements in demand and order book volumes in the year ahead, backed by advertisements and greater client enquiries. However, the overall level of confidence dipped to a three-month low.

Expert Comments

Maitreyi Das, Global Economist, HSBC, elaborated, “The Indian manufacturing sector ended the June quarter on a stronger footing. The headline manufacturing PMI rose by 0.8 percentage points to 58.3 in June, supported by increased new orders and output. Consequently, firms increased their hiring at the fastest pace in over 19 years. Input buying activity also rose during the month. On the price front, input costs moderated slightly in June, but remained at elevated levels. Manufacturers were able to pass on higher costs to customers, as demand remained robust, resulting in improved margin. While the overall outlook for the manufacturing sector remains positive, the future output index receded to a three-month low, albeit it remains above the historical average.”