The Indian manufacturing sector continued to expand strongly in November, as a sharp increase in sales supported the fastest growth in production for nine months. The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) rose from 55.9 in October to 57.6 in November.
This indicated the strongest recovery in the sector’s health in ten months, as the headline figure was well above its longer-term average of 53.6. However, inflationary pressures are seen as a major risk going forward.
“Companies increased input purchases, which led to the second sharpest accumulation in buying stocks since data collection began nearly 17 years ago. In addition, three consecutive months of job losses,” IHS Markit said in a statement on Wednesday. After, there were signs of improvement in hiring activity. Manufacturers said consolidating demand, improving market conditions and successful marketing boosted sales in November.
Factory orders grew for the fifth month in a row and at a faster pace, the fastest since February. The underlying data suggested that the domestic market was the main source of sales growth, as new export orders grew at a weaker pace than in October.
It said companies buoyed by an uptick in demand increased production volumes during November and production grew faster and at the fastest rate in nine months. The PMI varies between 0 and 100, with a reading above 50 indicating an overall increase over the previous month, and below 50 indicating an overall decrease.
“The fact that firms bought additional inputs at a stronger rate amid efforts to re-stock, combined with a recurring decline in finished goods inventories and tentative signs of a pick-up in hiring activity That’s going to increase in production volumes in the near-term,” said Pollyanna de Lima, economics associate director at IHS Markit.
Inflationary pressures are the major risk to the manufacturing outlook. “In addition to potential new waves, major threat to approach” COVID-19, inflationary pressure. For now, companies are bearing most of the additional cost burden and only marginally lifting the output charges. Should raw material shortages and shipping issues persist through procurement prices, production duties may see a substantial increase and demand resilience will be tested,” she said.
The PMI is compiled from responses to a questionnaire sent by IHS Markit to purchasing managers in a panel of approximately 400 manufacturers based on the size of the company’s workforce as a contribution to GDP. Survey responses are collected in the second half of each month and show the direction of change compared to the previous month.
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