India's June factory growth slips to second-weakest since mid-2022 as demand softens, PMI shows

BENGALURU: India’s manufacturing sector expanded at its second-slowest pace in four years in June as cooling demand for goods dragged on output and hiring but easing cost pressures provided some relief, a survey showed.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 54.2 in June from May’s 55.0 - slightly lower than a preliminary estimate of 54.5. Only March’s reading was weaker going back to mid-2022.

Despite falling to the second-lowest since mid-2022, the June’s number was in line with the long-run series average. A PMI reading above 50.0 signals growth.

New orders - a key measure of demand - rose at their second-weakest rate since June 2022 after hitting a three-month high in May. Export orders were notably softer as international sales grew at the weakest pace in 39 months with firms citing subdued demand from European clients.

Output also expanded at the second-slowest rate since mid-2022 as capital goods dragged.

India’s May industrial output grows 5.1% y/y on higher electricity output

As demand lost momentum firms were more reluctant to raise prices. Output charges rose at their slowest rate in three months and 93% of companies left fees unchanged from May. Input cost inflation eased to a four-month low though firms continued to flag higher prices for chemicals, metals, petroleum products and plastics.

Hiring reflected the softer demand environment. Employment grew at its weakest pace this year and 97% of firms kept headcount unchanged citing adequate capacity.

Concerns over demand and market conditions dampened business confidence to a five-month low.