India's PMI Growth Slows Amid West Asia Tensions: HSBC Flash PMI
Indian output growth softens in March amid global uncertainty.
Top Summary
- What happened: India's manufacturing and service sectors saw slower output growth in March, with the PMI Composite Output Index at 56.5.
- Why it matters: This indicates a potential slowdown in economic momentum due to factors like the Middle East war and inflationary pressures.
- What changes for people: Companies are absorbing cost increases, but consumers may eventually see higher prices.
- Who is affected: Businesses across manufacturing and service sectors, particularly those reliant on domestic demand, are affected.
PMI Growth Eases
India's output growth decelerated in both manufacturing and services in March, according to the HSBC Flash India PMI data.
The PMI Composite Output Index registered at 56.5, reflecting a slowdown in the combined output of the two sectors.
Domestic Demand Softens
"Softer domestic demand weighed on new orders, which rose at the slowest pace in more than three years, despite a record surge in new export orders. Cost pressures intensified, but companies are absorbing part of the increase by squeezing margins,"
said Pranjul Bhandari, Chief India Economist at HSBC.
New orders increased at the slowest rate in over three years, despite strong export performance.
Impact of Global Events
Companies cited the Middle East war, unstable market conditions, and inflationary pressures as factors dampening growth.
Input costs and selling charges increased at the fastest rates in 45 and 7 months, respectively.
Order Books and Inventory
New orders placed with both manufacturing and service companies saw softer increases.
Overall sales grew at the slowest pace since November 2022, according to S&P Global data.
Outstanding business volumes rose for the fourth consecutive month, but at a marginal pace.
Manufacturing Sector Details
The manufacturing sector saw further increases in buying levels and stocks of purchases, though the rate of expansion slowed from February.
Vendor performance showed a marked improvement in delivery times.
Cost Pressures and Pricing
"Firms absorbed a large part of their additional cost burdens, as indicated by a rise in selling prices that trailed that of input costs by a considerable margin. Nonetheless, the rate of charge inflation was marked and the strongest in seven months,"
the PMI data stated.
Optimism for the Future
Indian private sector firms remain optimistic about future output levels over the next 12 months.
Reasons for this optimism include efficiency enhancements, marketing campaigns, and new client inquiries.
What to Watch Next
Future PMI data releases will be crucial to monitor whether the current slowdown is temporary or indicative of a more prolonged trend. Monitoring global events and their impact on domestic demand and inflation will also be important to gauge the Indian economy's trajectory.