HSBC PMI for India rose to 51.3 in November from 49.6 in October led by a pickup in output and new orders

India’s manufacturing purchasing manager index (PMI) rose to 51.3 in November from 49.6 in October, above the expansion/ contraction threshold of 50 and led by a pickup in output and new orders.

HSBC India has said that companies have raised their production level for the first time in the last seven months, which resulted in PMI to climb to above 50 level in November.

Leif Eskesen, chief economist for India and Asia at HSBC said, “Manufacturing activity picked up led by a rise in new domestic orders, which helped pull up output growth. Encouragingly, input and output price inflation eased, which, if sustained, could imply that the RBI is getting closer to the end of its tightening cycle, although it may still need to notch rates up a bit further.”

HSBC India PMI is a composite index depicting operating conditions in the manufacturing sector. It rose to 51.3 in November from 49.6 in October.

For the first time after July, the index is above 50. This also shows that output has increased so as new orders, while there is modest growth of input buying.

The output index jumped to 51.5, its first reading above 50 in the last seven months, up from 48.6 in October and led by the consumer goods sector.

New orders rose to 51.9 in November from 48.9 in October, its first reading above 50 in the last six months, led by the consumer goods sector likely because of the good summer harvest. However, export orders eased to 50.6 from 52.3 in October, which indicates marginal slack in external demand.

Firms de-stocked finished goods inventories to meet demand, as power outages constrained operations. As a result, the new orders-to-inventory ratio rose to 1.03 in November from 0.94 in October, which suggests scope for manufacturing output to increase further if the improvement in the demand outlook continues.

On inflation, the input price index dropped sharply to 58.0 in November from 64.5 in October, reversing the steep uptrend of the previous five months and likely reflecting rupee appreciation over the last three months. Likewise, the output price index eased to 51.9 from 55.3, which suggests that firms responded to the decline in input costs. As the input price index fell more than the output price index, the ratio of output to input prices – a proxy for margins – improved this month.