HSBC India PMI dips to 51.3 in March

Manufacturing operating conditions continue to improve in March, albeit slightly

HSBC India Purchasing Managers' Index (PMI) dipped to 51.3 in March from the February's one year high of 52.5, as output and new orders increased at weaker rates. The index signalled a slight and weaker improvement of business conditions across the country's goods producing sector. Nonetheless, the PMI average for Jan-Mar 2014 (51.7) was the highest since the same period in 2013. Encouragingly, growth of new export orders picked up pace over the month.

Consumer goods continued to outperform the other two market groups, with robust increases in output and new orders registered in March. Operating conditions also improved at intermediate goods companies, but deteriorated in the capital goods category.

Manufacturing production growth across India eased from February's one-year high and was modest overall. While panellists reported higher levels of incoming new work, there was evidence suggesting that competitive pressures and shortages of some raw materials hampered growth.

Similarly, new orders rose at a weaker clip in March, with the respective index dropping since February and being below the long-run series average. Survey participants commented on higher underlying demand, but indicated that increased competition for new work and the elections had weighed on growth.

Indian manufacturers reported higher new export orders in March, stretching the current period of growth to six months. The latest increase in new work from abroad was marked and the strongest since April 2011. Anecdotal evidence highlighted improved demand conditions in key export markets.

Manufacturing employment increased in March, marking a six-month sequence of expansion. Nonetheless, the rate of job creation remained marginal as around 98% of panellists reported unchanged workforce numbers.

Inflationary pressures eased in March. Input costs rose at the weakest rate in nine months and one that was below the series average. Similarly, output prices increased at the slowest pace since last June.

Purchasing activity increased further in March, although moderately and at a weaker rate than that recorded one month previously. Survey members reporting a higher quantity of purchases commented on rising production requirements.

Finally, stocks of purchases were broadly unchanged from the levels registered in February, while postproduction inventories were accumulated again in March. The rate of increase was, however, slight overall.

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