India’s manufacturing sector growth fell to a five-year low in August because of slower demand, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) moderating to 52.8 from 53.5 in July.
Softer demand conditions during the month led to weaker increases in buying levels and stocks, as well as a mild decline in employment, S&P Global said. Meanwhile, hikes to selling charges were confined to fewer than 7% of panellists, as cost pressures faded and several companies sought to protect order books, S&P Global said.
The August manufacturing PMI is the lowest since August 2021 and also below the long-run series average of 54.2, S&P Global, which compiles the PMI, said on Tuesday. A PMI reading of more than 50 denotes expansion in activity from the previous month, while a print below 50 indicates contraction.
Manufacturing PMI fell for the third consecutive month in August, signalling a loss of momentum as growth of both output and new orders slowed to five-year lows, S&P Global said. India’s GDP data released Monday showed that the manufacturing sector grew 9.2% in the April-June quarter, the quickest in three quarters.
“Demand trends softened across two of the three industrial groups tracked by the survey, with consumer goods the exception. Overall, new business increased at a marked rate but one that was the slowest for five years. Panellists attributed the weaker upturn to challenging market conditions and subdued appetite for some products,” S&P Global said.
The rise in exports moderated from July but manufacturing firms noted gains Australia, Germany, mainland China, Spain, Thailand and the US.
Production volumes continued to rise strongly in August, but growth eased to its weakest level in five years. “Firms linked the slowdown to softer demand conditions and more limited increases in new order volumes,” S&P Global said.
The softer sales environment was reflected in workforce and purchasing decisions as employment in the sector fell for the first time in two-and-a-half years, though the rate of decline was “only fractional”, S&P Global said.
Input buying expanded at the weakest rate in 62 months as some firms restocked while others trimmed purchases in line with softer demand, S&P Global said. Stocks of finished goods increased for the second month running, with companies linking the accumulation to lower-than-expected sales.
Price pressures eased in August. Manufacturers faced higher costs for materials such as steel and transport, but the overall rate of inflation was the weakest in six months, S&P Global said.
As input cost pressures eased, firms limited the increase in their selling prices. The rate of output charge inflation was the slowest in 45 months and below its long-run trend, S&P Global said.
Despite the softer performance, business expectations strengthened. “Around 16% of survey participants forecast higher output over the coming 12 months, while the remainder expect no change from present levels. Confidence rose to its highest mark since May, but remained subdued by historical standards,” S&P Global said.