India’s manufacturing PMI 2023 softens slightly to 57.8 in June from 58.7 in May

India’s manufacturing activity in June expanded at the second highest pace this year, driven by robust demand for the country’s goods in domestic and international markets, said a private survey on Monday.

S&P Global said that the Purchasing Managers’ Index (PMI) for manufacturing fell to 57.8 in June from 58.7 in May, even as the headline figure pointed to improvement in operating conditions.

The June figure marked two years of the index being above the 50-mark, separating expansion from contraction. A survey print above 50 indicates manufacturing expansion and below marks contraction. Earlier, in December 2022, PMI for manufacturing was recorded at 57.8.

“Central to the upturn [is] demand strength, which positively impacted several other measures such as sales, production, stock building and employment. Indian goods producers registered a sharp increase in new work intakes during June, and one that was among the strongest seen since February 2021. In addition to favourable demand conditions, panellists linked the upturn to advertising and new product releases,” said the credit rating agency.

Supported by client appetite, manufacturers increased their selling prices in June, as the rate of inflation change was strongest in 13 months and above its long-run average.

“Positive client interest continued to support the manufacturing industry, driving growth of output, employment, quantities of purchases and input stocks. These positive developments instilled greater confidence into manufacturers regarding growth prospects, boding well for business investment and the labour market,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

To meet demand for sales, manufacturers ramped up production in June and purchased additional resources at the end of the first fiscal quarter: such an increase being the second-strongest in over 12 years, said the survey.

“Suppliers to the Indian manufacturing sector were comfortably able to meet rising demand for inputs. This was signalled by another improvement in delivery times. Moreover, vendor performance strengthened to the greatest extent in around eight-and-a-half years,” it said.

“Presented with buoyant demand, manufacturers seized the opportunity to adjust their pricing strategies. The latest increase in output charges reflected firms’ ability to pass on higher cost burdens to customers while maintaining a competitive edge,” said De Lima.

The survey noted that goods producers sought to expand capacities by taking on additional workers in June as employment rose at a moderate pace that was broadly similar to May. The strong increases in sales led manufacturers to use their existing inventories of finished goods as post-production stocks fell at the quickest pace in the year-to-date.

The number for manufacturing PMI comes after the output in eight key infrastructure industries, or the core sector, expanded at 4.3 per cent in May and recorded positive growth in five of eight sectors.