India’s manufacturing growth stays strong as price pressures ease: PMI Manufacturing survey
India’s manufacturing sector growth maintained momentum with another expansion in October, although the rise was less than the pace in the previous month due to softer increases in output and new orders, a private survey showed.
Growth of new export orders, which reached a six-month high, and easing price pressures provided the support, with companies continuing to add jobs and build inventories, although hiring remained subdued and business confidence weakened, according to the HSBC India Manufacturing Purchasing Managers’ Index (PMI) released on Monday.
The seasonally adjusted index fell to 54.7 in October from 55.1 in September and remained below the flash figure readings of 54.9. But the index was comfortably above the neutral mark of 50 and its long-run average, thereby signalling a strong improvement in the health of the sector.
“A sustained improvement in demand was reflected in a further sharp rise in new business. Growth eased only marginally from September’s seven-month high and remained strong by historical standards. Panel members cited favourable demand trends, new client wins and successful marketing campaigns,” the survey said.
One reason for the continued momentum in the manufacturing sector was good growth in the overseas markets as new export orders increased at the fastest rate in six months. Companies reported gains from a broad range of destinations, including Bangladesh, Canada, Indonesia, Nepal, Oman, Saudi Arabia, Sri Lanka, the UK, the US and the UAE, the survey said.
“Strong international demand pushed the growth of new export orders to a six-month high, supporting a robust rise in output,” said Pranjul Bhandari, chief India economist at HSBC. “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. Although some material and energy costs increased, overall input and output price pressures eased slightly from the previous month.”
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The survey said that rising sales and new product releases helped companies lift output at a sharp rate that exceeded its long-run average. Growth nevertheless softened from the previous month, driven by a slowdown among intermediate goods makers even though this category still led the expansion.
Another positive for the sector was moderation in cost pressures across all three broad areas of India's manufacturing industry monitored by the PMI survey. Although survey members reported higher prices for several materials and energy, the overall rate of input cost inflation retreated to its lowest since February, the survey said.
Indian goods producers increased selling prices to protect margins, but the rise was only slight and the weakest in just under four years.
Higher production requirements and rising workloads encouraged a second successive monthly increase in factory employment. The pace of job creation eased, however, and was only slight.
Outstanding business volumes, meanwhile, rose for the seventh consecutive month at the start of the third fiscal quarter, though the pace of accumulation was fractional. The survey noted that alongside adjustments to staffing, Indian manufacturers continued to build inventories. Finished goods stocks rose at an unprecedented pace, with companies reporting deliberate efforts to accommodate buoyant demand and prevent shortages.
Input inventories increased more quickly, with the rate of accumulation reaching an eight-month high, said the survey. Input purchasing growth entered its 64th straight month in October, but the pace of expansion slowed to its weakest level over this period.
Despite continued demand growth, business confidence slipped from September and remained below its long-run average. Close to 18% of the manufacturers anticipated higher output over the coming year, while the remainder were neutral, the survey showed. Positive expectations were underpinned by new client enquiries and demand for industrial automation and technology solutions.
The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of about 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.
Subhash is the infrastructure editor at Mint and tracks the momentous developments taking place in the space that is fast changing the Indian landscape. He finds reporting to be a passion that provides the necessary adrenaline rush and keeps you going.
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