India’s manufacturing activity rose at the slowest pace in five months in September but it remained solid, with strong demand driving business confidence to its highest level this year, despite increased inflationary pressures, according to the S&P Global Purchasing Managers’ Index (PMI). The Manufacturing Purchasing Managers’ Index (PMI) by S&P Global came in at 57.5 in September as against 58.6 in August, missing Reuters estimates for 58.1. This marked the 27th straight month of the index being above the 50-mark separating expansion from contraction.
S&P Global said that good producers in India noted a mild slowdown in growth during September, nevertheless, a sharp rise in new orders underpinned sustained expansions in output, input purchasing and employment. “Supply-chain conditions were broadly stable, which helped drag down the rate of input price inflation to its weakest in over three years. That said, greater labour costs, upbeat business confidence and buoyant demand facilitated a sharper increase in factory gate charges,” the survey said.
According to the latest PMI report, new orders, the largest sub-component of the PMI, rose at a softer pace in September. Nonetheless, the latest increase was sharp and historically strong. The survey participants, S&P Global said, cited favourable demand trends, positive market dynamics, and fruitful advertising as reasons for the expansion in sales.
“India’s manufacturing industry showed mild signs of a slowdown in September, primarily due to a softer increase in new orders which tempered production growth. Nevertheless, both demand and output saw significant upticks, and firms also noted gains in new business from clients across Asia, Europe, North America and the Middle East,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
The report also maintained that the growth of new export orders softened by August’s nine month high but remained sharp. Companies recorded new business gains from clients in Asia, Europe, North America and the Middle East.
Further, recent data indicated a reduction in the surge of costs that Indian goods producers faced. The inflation rate, which had reached a one-year high in August, has now decreased to its lowest point in over three years. Panellists indicated paying more for copper, electronic components, foodstuff, iron and steel, but noted lower costs for aluminium and oil. Reportedly driven by higher labour costs and demand strength, average prices charged by Indian manufacturers rose at a solid and faster rate that outpaced its long-run average.
“Manufacturers held a strongly positive outlook for production, as they expect demand to strengthen over the course of the coming 12 months. Upbeat forecasts continued to drive job creation efforts and initiatives to replenish input stocks. Together, these indices point towards a favourable trajectory for the Indian manufacturing industry,” said Pollyanna De Lima.
“However, while robust demand was supportive of production growth, it added to price pressures in September. The solid increase in output charges signalled by the PMI data, which occurred in spite of a notable retreat in cost pressures, could restrict sales in the coming months,” Pollyanna De Lima added.
S&P Global further said that ongoing increases in new orders continued to underpin production growth at the end of the second fiscal quarter. Output rose at the slowest pace in five months, albeit one that was substantial and above the long-run series average, it said.
Manufacturers, it added, were confident that output volumes would increase over the course of the coming 12 months, with the overall level of positive sentiment improving to its highest in 2023 so far.
Inflation in India eased in August to 6.83 per cent from July’s 15-month high of 7.44 per cent but remained above the RBI target range of 2-6 per cent.