India’s manufacturing activity eased to 54.7 in October from 55.1 in September. Despite this, the sector continues to expand, driven by a six-month high in export orders and weakened price pressures, according to S&P Global data.
India Manufacturing Sector Performance
India’s manufacturing activity moderated slightly in October, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) easing to 54.7 from 55.1 in September, even as export order growth reached a six-month high and price pressures weakened, according to the data released by S&P Global. Despite the decline, the index remained “comfortably above the neutral mark of 50.0”, indicating continued expansion in the manufacturing sector. It also stayed above its long-term average.
Export Demand and Production
The report said growth in new business remained strong, with new export orders increasing at the fastest pace in six months. Manufacturers reported higher demand from markets including Bangladesh, Canada, Indonesia, Nepal, Oman, Saudi Arabia, Sri Lanka, the United Kingdom, the United States and the UAE. Stronger overseas demand supported a sharp rise in factory output, although production growth softened from September. The report attributed the increase in new business to “favourable demand trends, new client wins and successful marketing campaigns”.
Inflation and Cost Trends
Price pressures also eased during the month. Input cost inflation retreated to its lowest level since February, while the increase in selling prices was “the weakest in just under four years”. Manufacturers reported higher prices for some materials and energy, but overall cost pressures moderated across all three broad manufacturing categories.
Economic Outlook and Employment
“Strong international demand pushed growth of new export orders to a six-month high, supporting a robust rise in output,” said Pranjul Bhandari, Chief India Economist at HSBC. She added that manufacturers increased input inventories at the fastest pace in eight months, building precautionary buffers to address potential shortages and meet rising production requirements amid a volatile global environment.
Factory employment increased for the second consecutive month, although the pace of job creation remained slight. Finished goods inventories rose at an unprecedented pace, as companies sought to accommodate demand and prevent shortages. However, the outlook remained cautious. The report said “business confidence slipped from September and remained below its long-run average”. Around 18 per cent of manufacturers expected output to increase over the coming year, supported by new client enquiries and demand for industrial automation and technology solutions.
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