Commerzbank’s Dr. Henry Hao and Moses Lim note India's flash March PMIs point to growth moderation rather than a sharp slowdown, as manufacturing softens but external demand stays resilient. However, higher global Oil prices are squeezing margins and sustaining inflation pressures, with Indian Rupee (INR) remains Asia’s weakest currency year-to-date on outflows and a higher import bill.

Growth moderates as Oil keeps pressure on INR

"INR has been on the back foot in the past few weeks due to foreign portfolio outflow and a higher import bill from elevated global energy prices. It has been the weakest performing Asian currency this year. Year-to-date, INR is down 4.3% vs the USD compared to the average for Asian currencies ex-Japan of -1.4%."

"The flash March manufacturing PMI dropped to 53.8 vs 56.9 in February, the weakest reading in four-and-a-half years but still above the 50-neutral mark. The decline was driven by softer output, with factory activity at its lowest level since August 2021 as geopolitical uncertainty weighed on production. New order growth also moderated, though external demand remained resilient, supported by orders from Asia, Australia, Europe, and the US."

"Overall, the flash PMI suggests growth moderation rather than a sharp slowdown. While manufacturing output and new order momentum softened, resilient external demand indicates the drag stems from uncertainty and cost pressures rather than a collapse in demand. Higher crude oil prices are compressing manufacturers' margins, while services firms have been able to pass these costs on."

"The recent jump in global crude oil prices has intensified inflationary pressures, with input costs surging to nearly a four-year-high. However, firms have largely absorbed these costs and kept selling prices steady."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)