Manufacturing activity eases in Oct as new order growth drops
International demand pushed growth of new export orders to a six-month high
Stronger demand from overseas markets, however, provided support, with export order growth reaching a six-month high. The HSBC Purchasing Managers Index (PMI), compiled by S&P Global, fell to 54.7 in October from 55.1 in September and 59.2 a year earlier. A reading above 50 indicates expansion, while one below that signals contraction.
"India's manufacturing PMI softened in October from the previous month but remained firmly in expansionary territory and above its long-run average," said Pranjul Bhandari, chief India economist at HSBC.
Business confidence weakened from September and remained below its long-run average, despite continued demand growth. Around 18% of manufacturers surveyed expected output to increase over the next 12 months while the remaining anticipated no change.
Optimism among manufacturers was supported by fresh client enquiries and demand for industrial automation and technology solutions. The survey highlighted a sustained improvement in demand, reflected in another sharp rise in new business. Manufacturers attributed the rise to favourable market conditions, new client acquisitions and successful marketing initiatives.
Export markets also contributed to the growth. Firms cited gains from Bangladesh, Canada, Indonesia, Nepal, Oman, Saudi Arabia, Sri Lanka, the UK, the US and the UAE.
"Strong international demand pushed growth of new export orders to a six-month high, supporting a robust rise in output," said Bhandari. Higher sales and new product launches encouraged manufacturers to increase production at a sharp pace, keeping output growth above its long-run average. However, the rate of expansion eased from September, largely due to slower growth among intermediate goods producers, although the segment continued to lead the expansion.
"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," said Bhandari.
Meanwhile, cost pressures eased across all three broad segments of India's manufacturing sector. While manufacturers reported higher prices for several materials and energy, the overall rate of input cost inflation fell to its lowest since February. Goods producers raised selling prices to protect margins, but the increase was marginal and the weakest in just under four years.