S&P Global India Manufacturing PMI eases to 55.1 from 56.2 in August

In September, Indian manufacturers clocked the slowest growth in factory orders since June, as per S&P Global India Manufacturing Purchasing Managers’ Index (PMI), which slid marginally to 55.1 from 56.2 in August.

A reading of 50 on the PMI indicates no change in firms’ activity levels, and September marked the 15th month in a row that manufacturing activity expanded.

New export orders rose for the sixth successive month, and at the fastest pace since May 2022, even as the uptick in input costs dipped to the slowest rate in almost two years thanks to subdued global demand for raw materials and recession risks.

Indian producers responded to the relief on raw material cost surges by restricting hikes in selling prices, dragging inflation in output prices to a seven-month low, the Survey-based PMI signalled. Goods producers enjoyed a weaker inflationary environment as input costs rose at the slowest pace since October 2020 and just 8% of companies surveyed by the firm reported higher purchasing prices.

With inflation worries tamed, businesses exuded more confidence about future prospects with the overall level of positive sentiment seen in September being the best in over seven-and-a-half years. However, currency risks and the impact of a weaker rupee on inflation and interest rates could derail optimism during October, S&P Global Market Intelligence economics associate director Pollyanna De Lima reckoned.

“The latest set of PMI data show us that the Indian manufacturing industry remains in good shape, despite considerable global headwinds and recession fears elsewhere. There were softer, but substantial, increases in new orders and production in September, with some leading indicators suggesting that output looks set to expand further at least in the short-term as firms seek to fulfill sales contracts and replenish stocks,” she said.

Ongoing increases in new work and efforts to lift production boosted job creation in September, which rose at the fastest pace in three months, ‘albeit one that was slight overall’, as per the PMI survey.

While all broad manufacturing segments reported expansion, the capital goods sector reported the strongest growth in new orders, international sales as well as output.

September marked the third month in a row that business sentiment improved. in August, when the PMI hit the highest level since November 2021, optimism among producers had hit a six-year high.

To accommodate higher sales and greater output needs, firms also acquired more inputs after firms dug deep into their inventories in September, S&P Global said.

“Stocks of finished goods fell at the fastest pace since February. Sustained input buying growth supported firms in their efforts to lift pre-production stocks in September. The rate of inventory accumulation was solid and accelerated from August,” the firm said. However, suppliers’ performance clocked ‘a marginal deterioration’ after improvements in each of the previous three months.

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