BENGALURU, Jan 2 (Reuters) - India's manufacturing activity experienced its slowest growth in December, marking a shift towards weaker demand, according to the latest Purchasing Managers' Index (PMI) data from Reuters. The HSBC India Manufacturing Purchasing Managers' Index recorded a decline to 56.4, its lowest level since December 2023, slightly down from 56.5 in November. This drop raises concerns for the start of 2025, especially amid reports of increasing cost pressures and a softer rate of expansion in both output and new orders.

The index, which signifies growth when above 50, indicates that despite the slowdown, the manufacturing sector has maintained a pattern of expansion for over three and a half years. Ines Lam, an economist at HSBC, commented 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."

New orders expanded at their weakest rate for the year, suggesting potential challenges for future production. Nevertheless, the index reflects positivity in the manufacturing sector due to sustained job growth, with companies hiring additional staff for the tenth consecutive month, marking the fastest rate of job creation since August.

Despite the decline in overall activity, it is noteworthy that international conditions improved, leading to a significant increase in exports. As manufacturing firms faced declining input prices, there was an opportunity to pass on some cost relief to clients, although demand pressures remain high.

As we look into 2025, business sentiment is mixed, tempered by inflation concerns and competitive pressures. However, there remains cautious optimism, driven by expectations of increased output and demand in the near future. This sentiment was echoed by a Times of India report stating that the manufacturing sector hit a twelve-month low, emphasizing the ongoing challenges faced by industry stakeholders.