Manufacturing PMI rises to 21-month high in Nov

New Delhi: In November, manufacturing activity in India rose to a 21-month high, though that didn't lead to additional hiring, showed the HSBC Purchasing Managers' Index (PMI), released on Monday.

The data also pointed to an uptick in price pressure, owing to a commentator on the report advising the Reserve Bank of India (RBI) to hold policy rates at its monetary policy review on Tuesday, despite persistent demands from India Inc to ease rates.

For November, the PMI rose to 53.3 points from 51.6 points in October. Monday's data come a few days after official data showed India's economy grew 5.3 per cent in the quarter ended September, against 5.7 per cent in the previous one, owing to the manufacturing sector expanding only 0.1 per cent in the September quarter, against 3.5 per cent in the previous one.

A reading of more than 50 in the PMI for manufacturing, based on a survey of about 500 private firms, means expansion, while a reading of less than 50 shows contraction. The survey includes output, outlook and confidence of respondents.

The improvement in conditions in manufacturing, the 13th consecutive rise, was across segments, said Markit Economics, which compiled the data. It added the performance of the consumer goods segment was the best in the broad areas monitored. However, official data on the Index of Industrial Production (IIP) hasn't shown any sustained uptick in consumer goods this year, at least in the durables segment. In September, for instance, consumer goods production declined 11.35 per cent, while production of consumer non-durables rose just 1.5 per cent.

In November, growth in production in the manufacturing sector was the highest since February, 2013, which Markit Economics attributed to rising new work inflows. "November data reinforced reports of stronger-than-expected demand, as new order growth accelerated to the quickest in 21 months," the firm said.

In new orders, the consumer goods segment fared the best, Markit Economics said.

During the month, foreign orders received by Indian goods producers continued to see strong growth. By and large, survey respondents attributed this to strengthening demand from key export clients.

This trend, too, was in contrast to official data, which showed exports had declined in October.

"Manufacturing activity accelerated further in November, led by higher output and new orders. Domestic orders saw the biggest increase, even as new export orders continued to be strong," said Pranjul Bhandari, chief India economist at HSBC.

Despite accelerated expansion in output and new business, employment in the Indian manufacturing sector remained broadly unchanged, said a commentary released along with the data.

Just a day ahead of the RBI's monetary policy review, Markit Economics said higher prices of metals, chemicals and energy led to a significant rise in input costs in November, the 68th month of cost inflation. Also, inflationary pressures intensified during the month, following three consecutive months of easing.

Among the surveyed sub-categories, the sharpest increase in input costs was seen in the intermediate goods segment.

Rising input costs, along with improving demand, drove output prices higher in November. The rise in output inflation rose to the highest in five months.

"The sharp rise in input prices was surprising, but future prints might be lower as falling commodity prices eventually lead to softer intermediate goods prices," said Bhandari. The pick-up in output prices, he added, could signal a revival in pricing power among businesses.

"Higher output and an uptick in final prices should convince RBI to stay on hold at its coming meeting," Bhandari said.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.