Manufacturing recovery strengthens in April but costs rise

The S&P Global India Manufacturing PMI signals that manufacturers have passed on costs to consumers at the fastest pace in a year

The S&P Global India Manufacturing PMI signals that manufacturers have passed on costs to consumers at the fastest pace in a year

India’s manufacturing sector saw orders and output pick up in April, according to the S&P Global India Manufacturing Purchasing Managers’ Index (PMI), which rose to 54.7 last month from 54 in March, even as inflationary pressures mounted. A score of 50 on the index indicates that the level of business activity has not changed.

New export orders rebounded in April after falling in March, but consumer goods manufacturers reported a fall later in the month. Rising commodity prices pushed up input costs at the highest rate in five months, while the rate at which producers passed higher costs on to consumers was the highest in a year.

While business confidence improved somewhat in the first month of the fiscal year, overall optimism remained muted as several companies noted that the year ahead is difficult to predict. Most producers didn’t change their headcount in April, but some reported a slight increase, mostly because companies are still operating below their current capacity limits.

“A key takeaway from the recent results was an intensification of inflationary pressures as volatility in energy prices, global input shortages and the war in Ukraine pushed up purchasing costs,” said Pollyanna De Lima, economics associate director at S&P Global .

Companies had responded by raising their fees the most in a year. “This escalation in pricing pressures could dampen demand as companies continue to share additional cost burdens with their customers,” she noted, stressing that expectations for growth prospects remain subdued.

Firms signaled further increases in input costs in April, with costs for chemicals, electronic components, energy, metals, plastics and textiles reportedly higher than in March. The hikes were partly attributed to rising transport fees and the war in Ukraine, and the headline inflation rate rose to a five-month high, beating its long-term trend, S&P Global said in a statement.

Despite the higher costs, companies have increased their April purchases at the fastest pace since November 2021, according to the PMI, which is compiled based on responses to questionnaires sent to purchasing managers at a panel of around 400 manufacturers.

“Additional cost burdens were also shared with consumers in April, as evidenced by a further increase in retail prices. Inflation was solid and the fastest in a year,” said S&P Global.

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