India’s manufacturing industry ended 2022 on a solid footing as business conditions improved at the fastest rate in over two years while growth in new orders and output accelerated, a business survey showed on Monday.
The manufacturing purchasing managers’ index, compiled by S&P Global, rose to 57.8 in December from November’s 55.7, better than a Reuters poll median forecast for 54.3.
December’s reading was the highest since October 2020 and above the 50-mark that separates growth from contraction for an 18th straight month. The survey was conducted December 6-19.
Monday’s data cemented the view Asia’s third-largest economy is better placed than many other emerging economies to weather the impact of a potential global recession.
“Following a promising start to 2022, the Indian manufacturing industry maintained a strong performance as time progressed, wrapping the year with the best expansion in production seen since November 2021,” noted Pollyanna De Lima, economics associate director at S&P Global Market.
“Demand strength took centre stage among the reasons provided by firms for improvements in many measures. Additional materials were purchased and extra workers hired as companies sought to supplement production and maintain healthy levels of inventories. Input stocks rose at a near-record pace.” While both new orders and output continued to grow strongly exports rose at the slowest pace in five months as slowing global demand weighed on exports.
Rising domestic demand, however, did little to improve conditions in the labour market as the rate of job creation eased to a three-month low.
While input price inflation remained relatively muted in December, the prices manufacturers charged for their goods rose at the quickest pace since mid-2022.
That might keep overall inflation above the Reserve Bank of India’s medium-term target of 4% over the coming months, curtailing the chances of policy easing by the central bank anytime soon.
Optimism about the next 12 months was little changed, remaining close to historical highs. The index only dipped from November when it was the highest in over seven-and-a-half years.
“While some may question the resilience of the Indian manufacturing industry in 2023 amid a deteriorating outlook for the global economy, manufacturers were strongly confident in their ability to lift production from present levels,” added De Lima.
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