India’s manufacturing activity concluded 2024 on a subdued note, as growth slowed in December to its weakest pace of the year. Despite easing cost pressures and strong job creation, the sector faced softening demand, resulting in a dull outlook for the start of 2025, showed a private survey.
Weakening Manufacturing Growth in December
According to the final India Manufacturing Purchasing Managers’ Index (PMI) released by HSBC and compiled by S&P Global, the index dropped to 56.4 in December, marking its weakest level since December 2023. This was a marginal decrease from November’s reading of 56.5 and lower than an earlier estimate of 57.4, which had suggested a faster pace of expansion.
Despite the slowdown, manufacturing output continued to show consistent growth, with the index remaining above the neutral 50-mark for the past three-and-a-half years. However, the weaker-than-expected performance in December pointed to signs of moderation in the industrial sector’s momentum.
Slower Demand and Expansion in Orders
In December, the rate of expansion in new orders, a key indicator of demand, slowed to its weakest pace of the year, signaling that future production growth may be subdued. While both output and new orders continued to rise, the improvement was more gradual compared to previous months.
Ines Lam, an economist at HSBC, remarked that “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.” Lam also noted that the deceleration in new orders pointed to weaker growth prospects in the near term.
Exports Experience Strong Growth Amidst Global Demand
On a positive note, the international landscape showed improvement, which aided in a significant boost to exports. Exports grew at the fastest rate in five months, driven by stronger demand from regions like Asia, Australia, Europe, and the Americas. This positive trend helped offset some of the pressures from domestic demand slowdown.
Job Growth Continues, But Outlook Remains Cautious
Manufacturing firms maintained a steady pace of hiring in December, marking the 10th consecutive month of job growth. The rate of job creation, however, was the fastest since August, suggesting that firms continued to expand their workforce despite weaker domestic conditions.
At the same time, businesses took advantage of a slower rise in input costs by adjusting their output prices accordingly. The output prices sub-index declined at a slower pace than input prices, indicating that manufacturers were able to pass on some of the cost burden to customers. Lam added that “demand resilience supported pricing power” despite inflationary pressures.
Business Sentiment Cools Heading into 2025
Despite these positive indicators, business sentiment for the year ahead showed signs of cooling. Concerns about inflation and competitive pressures contributed to a less optimistic outlook, which saw a dip from November’s six-month high. The outlook for 2025 was, therefore, more cautious as manufacturers faced challenges from both domestic and global economic pressures.
