MUMBAI: Manufacturing sector activity slowed to a nine-month low in November as the 50 percent US tariffs dragged down exports, along with the fading of the boost from the GST rate cuts, as the headline purchasing managers index for the month fell sharply to 56.6 from 59.2 in October led by a steep plunge in new export orders that fell to a 13-month low.
HSBC, citing its manufacturing purchasing managers index (PMI), compiled by S&P Global, said Monday the index fell to a nine-month low in November as US tariffs weakened export orders and the GST rate cuts benefits faded slowing the overall factory activity.
However, economic activity is still in expansion mode and that only the pace has slowed as a reading above 50 denotes expansion in activity, and a print below that signifies contraction and that the headline figure remains in the expansion zone for the 53rd month running.
The previous low was in February, when the headline manufacturing PMI had stood at 56.3.
Pranjul Bhandari, the chief economist at HSBC India, said the final November PMI confirms that US tariffs have caused the manufacturing expansion to slow down. New export orders fell to a 13-month low.
“Business confidence, as indicated by expectations for future output, showed a big fall in November, potentially reflecting increasing concerns about the impact of tariffs. The boost from the cuts in GST rates may have faded and it might be insufficient to offset the tariff headwind to demand,” she added.
“Manufacturers noted a substantial upturn in their order books, which they attributed to competitive pricing, positive demand trends and greater client interest. The overall rate of growth eased to a nine-month low, however, challenging market conditions, delays in project starts and rivalry among firms,” the survey noted.
Besides, a softer rise in sales restricted growth of buying volumes and new job additions. Inflation rates also receded in November, with input costs and selling charges rising at the slowest rates in nine and eight months respectively, the survey said.
Although companies suggested that the trend for overseas sales remained favourable, reflecting greater sales to clients in Africa, Asia, Europe and the Middle East, overall growth momentum lost mildly as average, new export orders rose at the weakest pace in 13 months.
On the employment front, manufacturers adjusted their hiring efforts and purchasing activity in line with a slowdown in new order growth. The latter saw its weakest upturn since February as a result, “employment expanded at the softest pace in the current 21-month period of uninterrupted growth,” said the survey.
However, companies are confident of a rise in output over the course of the coming 12 months, but positive sentiment fell to its lowest level in nearly three-and-a-half years as they are concerned about rising competition.