Growth of Indian manufacturing sector picks up: Nikkei India Manufacturing PMI

Nikkei India Manufacturing PMI strengthened slightly in September to 52.2 up from 51.7 in August

India's manufacturing economy recorded an improvement in growth during September amid firmer gains in new orders, output and employment. Sales rose from both domestic and foreign clients, whilst manufacturers raised their buying activity and bolstered stocks of purchases in anticipation of further growth. On the price front, input costs rose at a stronger rate amid reports of higher prices for fuel and steel. Charges were subsequently increased at a slightly firmer pace. Manufacturers remain confident that output will increase over the coming year.

The Nikkei India Manufacturing Purchasing Managers Index (PMI) strengthened slightly in September to reach a level of 52.2 (up from 51.7 in August). Solid growth of the manufacturing sector during the latest survey period extended the current run of expansion to 14 months.

 

Underpinning the overall expansion was a firmer increase in levels of new work. Solid growth was linked to gains in both domestic and foreign demand. Indeed, export sales strengthened, with the net gain the best recorded since the start of the year. High product quality was noted as a factor supporting total new order book growth.

With new work increasing, manufacturing production was subsequently raised for a fourteenth successive month. Intermediate goods producers signalled a particularly strong increase in production, although growth was registered across all market groups.

Rising new work and increased production helped to drive growth of buying activity during September. In turn, this helped manufacturers to build inventories of purchases. Although modest, growth in pre-production goods was the sharpest recorded by the survey since May 2017.

Despite higher levels of new business, manufacturers were just about able to keep on top of their workloads in September. Backlogs of work were down slightly, the first such decline since March, whilst there was a further increase in manpower: staffing levels rose for a sixth successive month and at the fastest rate since June.

Meanwhile, price pressures intensified, with latest data showing that input costs rose to the greatest degree since June. There were reports that a strong US dollar and supply shortages had exacerbated high global prices for steel and fuel. Manufacturers passed on higher costs wherever possible via an increase in their own charges. Latest data indicated a modest, but nonetheless stronger, rise in output prices compared to August.

Finally, manufacturers are confident that output will be higher in 12 months time. Planned new product launches and developments, plus firmer market demand, all contributed to positive sentiment. That said, confidence softened slightly in September and was at a three-month low.

Commenting on the Indian Manufacturing PMI survey data, Paul Smith, Economics Director at IHS Markit and author of the report said, "Growth of India's manufacturing sector picked up during the latest survey period, reflective of strengthening demand especially from foreign clients, which helped to drive export growth up to its highest level since the turn of the year.

"However, cost pressures reignited in September, exacerbated by a stronger US dollar which continues to raise the relative price faced by Indian manufacturers for goods such as steel and fuel. Output charges increased subsequently, albeit at a rate that remains well below the equivalent measure for input prices.

"Rising prices continued to weigh on sentiment, with confidence dropping a little to reach a three-month low. Nonetheless, on balance, firms remain confident that output will continue to rise, buoyed by recent new business wins and expectations this will continue over the next 12 months."

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