Manufacturing continues to improve as new orders pick up; August PMI above 56 for 2nd month in a row | The Financial Express

Manufacturing continues to improve as new orders pick up; August PMI above 56 for 2nd month in a row

India’s manufacturing activity continued to improve in August, as input cost inflation receded further

Manufacturing continues to improve as new orders pick up; August PMI above 56 for 2nd month in a row
S&P Global in its report said that a sustained improvement in demand conditions boosted new order intakes at Indian manufacturers during August

India’s manufacturing activity continued to improve in August, as input cost inflation receded further. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) posted at 56.2 in August – little-changed from July’s reading of 56.4 – signalling the second-strongest improvement in operating conditions since last November. An index reading of 50 or above suggests expansion and below it points at contraction. “Indian manufacturers continued to benefit from the absence of COVID-19 restrictions, with rates of growth for both output and new orders picking up yet again to the strongest since last November,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.

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S&P Global in its report said that a sustained improvement in demand conditions boosted new order intakes at Indian manufacturers during August, which in turn pushed output growth to a nine-month high. Moreover, production volumes were also supported by a pick-up in exports and upbeat projections for the year-ahead outlook. “Firms were at their most optimistic for six years,” it added.

On the supply side, the results showed a further shortening of delivery times and a slower upturn in prices charged by vendors. Pollyanna De Lima added, saying that this robust performance was complemented by a fourth successive monthly slowdown in the rate of input cost inflation, which slipped to the lowest in a year amid softer pressures from commodity prices. “Factory gate charges rose at the second-weakest pace since the start of fiscal year 2022/23, one that was similar to July,” Lima noted.

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Contributions to the PMI from sub-indices varied as faster increases in new orders and output compared with slower expansions in employment and stocks of purchases. Indian manufacturers reported the fastest increase in production in nine months, which they attributed to greater sales, recent efforts to enhance capacities, fewer COVID-19 restrictions and product diversification.

Similarly, factory orders rose at the quickest pace since last November, reportedly boosted by strengthening demand conditions, new client wins and fruitful advertising. “Firms welcomed the weaker increase in input costs with an upward revision to output forecasts amid renewed hopes that contained price pressures will help boost demand,” Lima said. Pollyanna De Lima also said that inflation concerns, which had dampened sentiment around mid-year, appear to have completely dissipated in August as seen by a jump in business confidence to a six-year high.

S&P Global in its report also said that although manufacturers continued to signal higher prices for a wide range of materials in August, the overall rate of cost inflation softened to a one-year low as commodity prices (particularly aluminium and steel) moderated.

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