India's Manufacturing Expansion Eases As Demand Softens Despite Easing Cost Pressures And Strong Jobs Growth

India's manufacturing activity grew in December at its weakest pace for the year amid softer demand and despite easing cost pressures and strong jobs growth, a survey showed, dulling the outlook for the start of 2025.

The HSBC final India Manufacturing Purchasing Managers' Index, compiled by S&P Global, fell to 56.4 - the weakest since December 2023 - a slight decrease from November's 56.5 but below an early estimate that showed a rise to 57.4.

That confounded a preliminary reading showing faster expansion last month in a sector that accounts for about a fifth of overall output in Asia's third-largest economy, which grew at its weakest pace in seven quarters in July-September.

Still, manufacturing output has shown sustained expansion with the index remaining above 50, which separates growth from expansion, for the past three-and-a-half years.

"India's manufacturing activity ended a strong 2024 with a soft note amidst more signs of a slowing trend, albeit moderate, in the industrial sector," said Ines Lam, economist at HSBC.

"The rate of expansion in new orders was the slowest in the year, suggesting weaker growth in future production.”

While both output and new orders - a key gauge for demand - continued to rise last month, the improvement slowed.

That said, international conditions improved helping exports grow at the fastest rate in five months thanks to firmer demand from Asia, Australia, Europe and the Americas.

"The rise in input prices eased slightly, wrapping up the year when Indian manufacturers felt the strain of sharp cost pressures," added Lam

However, business sentiment for the year waned, curbed by inflation concerns and competitive pressures while the outlook cooled from November's six-month high.

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