India's Jan PMI Rises but Business Confidence Plummets

India's Manufacturing Activity Ticks Up in January

India's manufacturing sector showed a slight improvement in January, with the HSBC Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, rising to 55.4 from December's two-year low of 55.0. This reading, however, fell short of the preliminary estimate of 56.8.

The index has remained above the 50.0 mark that separates growth from contraction since July 2021, indicating sustained expansion in the sector.

Domestic Demand Drives Growth Amid Weak Exports

The growth was primarily fueled by a rebound in domestic new orders and factory output, which had slowed significantly in the previous month. In contrast, export demand remained weak, with new export orders showing only marginal improvement from December.

Input costs increased at the fastest pace in four months, driven by higher prices for materials like chemicals and steel. Despite this, output price inflation dropped to its lowest level in nearly two years, suggesting manufacturers have limited pricing power.

Waning Optimism and Subdued Hiring

Despite the uptick in activity, business confidence fell sharply to its lowest level in three-and-a-half years. The survey revealed that only 15% of companies anticipate an increase in output over the next year, with most expecting no change.

Consequently, job growth remained modest. While hiring rose to a three-month high, the overall increase was subdued as firms adjusted staffing to meet operational needs.

Summary: Mixed Signals for India's Manufacturing Sector

The January PMI data presents a mixed outlook. While current activity is growing, the steep decline in business confidence and persistent weak export demand suggest potential challenges ahead for India's manufacturing sector. Future momentum will depend on reviving business sentiment and strengthening global demand.

FAQ

Q: What was the India Manufacturing PMI in January?
A: The HSBC India Manufacturing PMI rose to 55.4 in January from 55.0 in December.

Q: Why did business confidence fall despite growth?
A: Confidence fell to a 3.5-year low as most surveyed companies anticipated no change in future output, reflecting subdued optimism about the year ahead.

Source: Investing.com