Inflation impacted the manufacturing sector in November as Purchasing Mangers’ Index (PMI) slipped to 11 months low of 56.5 in the said month as against 57.5 of October. Meanwhile, the good news is that job creation was solid.

“The rate of output expansion is decelerating due to intensifying price pressures. Input prices for a variety of intermediate goods — including chemicals, cotton, leather, and rubber — rose in November, while output prices soared to an eleven-year high as rising input, labour, and transportation costs were passed on to consumers,” Pranjul Bhandari, Chief India Economist at HSBC said.

PMI Manufacturing is based in survey among purchasing managers of 400 companies. Index above 50 means expansion, while below 50 reflects contraction.

According to survey report accompanying PMI, input cost inflation intensified midway through the third fiscal quarter, reaching its highest mark since July but remaining below its long-run average. Items such as chemicals, cotton, leather and rubber were reported as up in price. Although price pressures curbed domestic sales to a certain extent, growth of new export orders gained momentum. The rate of expansion in international demand was the best seen for four months, with panellists reporting gains from Bangladesh, mainland China, Colombia, Iran, Italy, Japan, Nepal, the UK and the US.

Talking about job, the report said that for the ninth month in a row, factory employment in India increased during November. “Despite softening from October, the rate of job creation remained solid. According to panel members, staff had been hired on both permanent and temporary bases,” it said. It may be noted that manufacturing is considered as biggest job multiplier.

The report said that Indian manufacturers purchased additional inputs for use in production processes and to place into inventories. The rise in buying levels was sharp, albeit the weakest in just under a year. Average lead times shortened further, reportedly due to strong relationships with long-standing suppliers. The improvement in vendor performance was mild but nevertheless the best since July.

Subsequently, manufacturers were able to add to their input stocks again. The rate of accumulation was notably above its long-run average, but retreated to the weakest in 2024 so far. Meanwhile, a sequence of falling stocks of finished goods dating back to August 2017 came to an end. “Business optimism was spurred by predictions that marketing efforts and new product releases will bear fruit. Recent capacity expansion efforts and forecasts of demand strength also underpinned upbeat forecasts for output in 2025,” the report said.

“India recorded a 56.5 manufacturing PMI in November, down slightly from the prior month, but still firmly within expansionary territory. Strong broad-based international demand, evidenced by a four-month high in new export orders, fuelled the Indian manufacturing sector’s continued growth. At the same time, however, the rate of output expansion is decelerating due to intensifying price pressures. Input prices for a variety of intermediate goods — including chemicals, cotton, leather, and rubber — rose in November, while output prices soared to an eleven-year high as rising input, labour, and transportation costs were passed on to consumers.”

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