India’s manufacturing growth momentum eases in Oct

India’s manufacturing sector activity lost some growth momentum in October compared to September as output and new orders increased only marginally, according to HSBC India Manufacturing Purchasing Managers’ Index (PMI) data released by S&P Global on Monday.

The headline figure, the manufacturing PMI — tracks factory conditions based on new orders, output, employment, suppliers’ delivery time, and stock of purchases — stood at 54.7 in October, compared to 55.1 in September. To be sure, manufacturing activity remained in expansion, as the index stood above 50.

“India’s manufacturing PMI softened to 54.7 in October from 55.1 in the previous month, but remained firmly in expansionary territory and above its long-run average,” said Pranjul Bhandari, chief India economist at HSBC.

New business increased in October reflecting sustained demand for manufacturing goods. Growth softened marginally from September, which recorded a seven-month high, though it remained strong by historical standards. Firms cited favourable demand trends, new client wins and successful marketing campaigns for the growth.

International orders increased at the fastest rate in six months and contributed to the index’s expansion. Firms reported gains from Bangladesh, Canada, Indonesia, Nepal, Oman, Saudi Arabia, Sri Lanka, the UK, US and the UAE.

Output increased at a sharp rate backed by rising sales and new product releases, which exceeded its long-run average. Though growth slowed compared to September as intermediate goods activity softened. However, intermediate goods still led the expansion.

Across all three broad areas of manufacturing tracked by the PMI survey, cost pressures eased. Although firms observed higher prices for energy and certain materials, overall inflation was the lowest since February. As a result, firms raised selling prices only slightly to protect margins.

Employment increased as new orders led to higher production requirements and rising workloads.

Outstanding business volumes against the orders received increased, but the pace of accumulation was very slow.

Finished goods stocks rose sharply, with firms reporting measured efforts to accommodate buoyant demand and prevent shortages. Input inventories also increased, leading the rate of accumulation to reach an eight-month high.

“Producers also increased input inventories to the greatest extent in eight months, building precautionary buffers to mitigate potential shortages and meet rising production requirements amid a volatile global environment,” she added.

Business confidence weakened in October compared to September and remained below its long-run average. Around 18% of firms expect higher output in the next twelve months, while others remained neutral.

Firms that remained optimistic credited this to new client enquiries and demand for industrial automation and technology solutions.