MUMBAI: The manufacturing activity has reported its weakest reading of 2024 in December with the manufacturing purchasing managers index (PMI) falling to 56.4, down from 56.5 in November. Yet the sector remained in the expansion mode throughout the year gone by, according to the data from an analysis by a private agency.
The final reading is surprising as this came in a month when the cost pressures have eased and strong jobs growth was reported, yet demand became softer in the sector, HSBC India said on Thursday.
According to the report, the headline reading for December at 56.4 is down marginally from 56.5 in November, yet the reading is above the long-run average of 54.1 thus signalling a robust growth rate. Both output and new orders, a key gauge for demand, continued to rise in the final month of the year but on a softer note.
On the employment front, the data indicate that the rate of job creation quickened to the fastest in four months. Around one in ten companies hired extra staff, while fewer than 2 per cent of them shed jobs.
Not only did manufacturing employment increase for the tenth month in a row during December, but also the rate of job creation quickened to the fastest in four months, said the report.
“Manufacturing activity ended on a strong note in 2024 despite the December reading being soft, amidst more signs of a slowing trend, albeit moderate, in the industrial sector. The rate of expansion in new orders was the slowest in the year, suggesting weaker growth in future production. That said, there was some uplift in the growth of new export orders, which rose at the fastest pace since July. The rise in input prices eased slightly, wrapping up the year when manufacturers felt the strain of sharp cost pressures,” said Ines Lam, an economist at HSBC.
Manufacturing PMI declined to an 11-month low of 56.5 in November, down from 57.5 in October, indicating a slowdown. Despite this deceleration, the PMI remained above the 50 mark, signifying continued expansion in the manufacturing sector, Lam added.
The slowdown is attributed to increased competition and rising price pressures, with input cost inflation reaching its highest since July. Notably, there was a significant rise in selling prices, marking the steepest increase since October 2013.
Anecdotal evidence showed that demand resilience supported pricing power. Ongoing improvements in new work intakes prompted manufacturing companies to purchase additional inputs for use in production processes. The rate of growth remained above its trend, despite being the second-slowest in 2024 but faster only than in November.