India's manufacturing growth slows to four-year low in June as demand weakens: HSBC PMI

India's manufacturing sector lost momentum in June, with factory activity expanding at its second-slowest pace since mid-2022 as weaker domestic and overseas demand weighed on production, hiring and business confidence, according to the latest HSBC India Manufacturing Purchasing Managers' Index (PMI) survey released on Tuesday.

The HSBC India Manufacturing PMI, compiled by S&P Global, slipped to 54.2 in June from 55.0 in May, below the flash estimate of 54.5. While the index remained comfortably above the 50-mark that separates expansion from contraction, it was the second-weakest reading since mid-2022, with only March posting a lower figure over the period.

The moderation was driven by slowing demand. New orders expanded at their second-slowest pace since June 2022 after touching a three-month high in May. Export orders also weakened sharply, with international sales growing at their slowest pace in 39 months, as manufacturers cited subdued demand from European markets.

The softer order pipeline translated into slower production growth. Manufacturing output expanded at its second-slowest pace since mid-2022, with the capital goods segment weighing on overall factory activity.

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The survey, however, indicated some relief on the cost front. Input cost inflation eased to a four-month low, although manufacturers continued to report higher prices for chemicals, metals, petroleum products and plastics.

As demand softened, firms were reluctant to pass on higher costs to customers. Output prices increased at their slowest pace in three months, while 93 per cent of surveyed companies left selling prices unchanged compared with May.

Hiring also reflected the weaker demand environment. Employment growth slowed to its weakest pace this year, with 97 per cent of manufacturers reporting no change in headcount, suggesting existing capacity was sufficient to meet demand.

Business confidence weakened to a five-month low as concerns over future demand and market conditions weighed on manufacturers' outlook.

Despite the moderation, the June PMI remained above its long-run average and continued to signal expansion in India's manufacturing sector, albeit at a slower pace than in previous months.