Manufacturing recovered some ground in June as PMI rose to 58.3

With a rise in number of new orders and resultant increase in output, manufacturing sector recovered some ground in June as compared to May, a private survey result on Monday showed. This also helped in creating fresh job opportunities,

HSBC Purchasing Managers’ Index (PMI) rose to 58.3 in June as compared to 57.5 in May. The index is based on survey conducted by S&P Global among purchasing executives of 400 companies. The index above 50 means expansion while below 50 index refers contraction.

“The headline manufacturing PMI rose by 0.8 percentage points to 58.3 in June, supported by increased new orders and output. Consequently, firms increased their hiring at the fastest pace in over 19 years. Input buying activity also rose during the month,” Maitreyi Das, Global Economist at HSBC, said.

Manufacturing has a share of over 17 per cent in Gross Value Added (GVA) and considered as biggest job multiplier.

The report accompanying survey result and PMI said that as a consequence of ongoing increases in new order intakes, firms stepped up recruitment. “The rate of job creation was sharp and the strongest seen since data collection started in March 2005,” it said.

However, overall expenses including pay bill went up. “On the price front, input costs moderated slightly in June, but remained at elevated levels. Manufacturers were able to pass on higher costs to customers, as demand remained robust, resulting in improved margin,” Das said.

June data showed that buoyant demand conditions spurred the expansions in new orders, output and buying levels. Concurrently, firms raised employment at the fastest rate seen in more than 19 years of data collection. Cost pressures receded from May, but were nevertheless among the highest over the past two years. As a result, companies lifted selling prices to the greatest extent since May 2022.

The month recorded more new export orders. Companies attributed higher inflows of new work from overseas to better demand from Asia, Australia, Brazil, Canada, Europe and the US. Despite easing from May, the rate of expansion was well above its long-run average. Input buying activity rose in June, extending the current sequence of monthly expansions to three years.

Among the main determinants of growth listed by panellists were stock replenishment efforts, robust demand and rising output requirements. Stocks of purchased materials rose at a near-record pace, supported by another improvement in suppliers’ delivery times. Finished goods inventories decreased further as firms often met sales through warehoused items.

Talking about future, nearly 29 per cent of panellists expecting output growth over the coming year. Firms forecast further improvements in demand and order book volumes in the year ahead, with advertising and greater client enquiries also underpinning optimism. “While the overall outlook for the manufacturing sector remains positive, the future output index receded to a three-month low, albeit it remains above the historical average,” Das concluded.