Manufacturing sector ended 2022 with a strong positive note as Purchasing Managers’ Index (PMI) rose to 57.8 in December. It was 55.7 in November. The good news is that fresh hiring also saw improvement.

The index is prepared by S&P Global Market Intelligence based on a survey conducted among purchasing managers of 400 companies. Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said that 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.

The agency noted that to address backlogged work, Indian goods producers hired additional staff at the end of the year. “The latest increase in employment was the tenth in consecutive months but the slowest since September,” it said. Manufacturing has a share of around 15 per cent and considered as job multiplier.

The agency said that the PMI average for the third fiscal quarter (56.3) was the highest recorded since one year ago. Demand resilience boosted sales growth in December, with the rate of increase picking up to the quickest since February 2021. In some instances, panellists indicated that advertising, product diversification and favourable economic conditions supported sales. “International demand for Indian goods also improved, but did so to a lesser extent than in November. Overall, new orders from abroad rose at the slowest pace in five months as several companies reportedly struggled to secure new work from key export,” it said.

According to De Lima, 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. “Less challenging supply-chain conditions also supported the upturn. Delivery times were reportedly stable, which enabled firms to secure critical materials and boost their input stocks. “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,” she said.

Cost pressures remained relatively muted in December, with the overall rate of inflation little-changed from November and the second-slowest since September 2020. Underlying data indicated that price reductions for some raw materials partly offset increases elsewhere. On the other hand, there was a solid and quicker upturn in factory gate charges during December. Moreover, “for the first time in close to two-and-a-half years, the rate of inflation for selling prices outpaced that seen for input costs. When assessing the year-ahead outlook for production, companies were optimistic. Advertising and demand buoyancy were cited as the key opportunities to growth prospects,” the agency said.

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