India manufacturing growth continues as new export orders growth surge

The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) rose to a 14-month high of 58.4 in June, up from 57.6 in May. The headline figure was above its long-run average of 54.1 and pointed to a substantial improvement in the health of the sector.

The manufacturing sector experienced a strong end to the first fiscal quarter, marked by improved trends in output and new orders, alongside a record upturn in employment.

Companies also welcomed one of the fastest increases in external orders in the over 20 years of survey history. Goods producers lifted input buying to the greatest extent in 14 months, which supported a further expansion in stocks of purchases.

Meanwhile, cost inflation eased to its lowest mark since February and was relatively negligible. Producer prices rose markedly, however, as demand buoyancy allowed firms to pass on higher freight, labour and metal costs to clients.

Production volumes increased at the fastest pace since April 2024, reportedly fuelled by efficiency gains, favourable underlying demand and greater sales volumes. June also saw a quicker upturn in new order inflows.

Indeed, growth of new export orders gained considerable momentum in June. Sector data indicated faster increases in international orders in the consumer, intermediate and investment goods categories.

Having stagnated in May, outstanding business volumes increased in June. Input price inflation retreated to a four-month low, despite rising iron and steel costs.

Strength in new business intakes was a significant factor influencing trends in purchasing activity and input stocks.

Inventories of finished goods fell again, however, as businesses often had to dig into warehouses to fulfil demand growth. The outlook for the Indian manufacturing sector remained positive in June.

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