In February, India's manufacturing sector experienced a notable uptick, reaching a five-month high, driven by a significant increase in factory production and sales, fueled by both domestic and international demand, as reported in a monthly survey released on Friday.
The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) climbed from 56.5 in January to 56.9 in February, marking the most robust improvement in the sector's health since September 2023.
According to PMI standards, a reading above 50 signifies expansion, while a score below 50 indicates contraction.
The survey highlighted that production saw its fastest growth in five months, leading to the most rapid increase in sales since September, accompanied by the strongest expansion in new export orders in 21 months.
Ines Lam, an economist at HSBC, commented, "The HSBC final India Manufacturing PMI indicates that production growth continued to be strong, supported by both domestic and external demand."
Despite the uptick in growth, employment in India's manufacturing sector remained largely unchanged, with producers indicating that current payroll numbers met their requirements adequately.
Regarding inflation, the survey revealed that purchasing cost inflation dropped to a 43-month low, resulting in a more moderate increase in selling charges. Input costs experienced the slowest rise in over three-and-a-half years.
Lam noted that manufacturing firms' margins improved due to the decline in input price inflation, reaching the lowest level since July 2020.
In addition to robust domestic demand, new export orders surged at the fastest rate in nearly two years, with demand stemming from various countries including Australia, Bangladesh, Brazil, Canada, China, Europe, Indonesia, the US, and UAE.
Manufacturers increased their buying levels in response to growing production requirements, sustained sales growth, and the need to build safety stocks, the survey outlined. Looking ahead, manufacturers hold a positive business outlook amid favorable demand conditions.
Data from the February survey indicated sustained optimism among manufacturers regarding future production, with overall confidence levels reaching the second-highest since December 2022.
"Bolstered by strong demand and improving profit margins, manufacturers are optimistic about future business conditions," Lam emphasized.
Compiled by S&P Global, the HSBC India Manufacturing PMI gathers responses from around 400 manufacturers' purchasing managers to assess the sector's performance.
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