Growth in Indian mfg sector slows to 3-mth low in August, PMI dips to 57.5

Growth in the Indian manufacturing sector slowed to a three-month low in August, as firms saw softer growth in new orders and output. The headline Purchasing Managers Index (PMI) figure released by HSBC on Monday stood at 57.5, down from 58.1 in July.

 A figure above 50 in the index denotes expansion and that below signifies contraction.

However, cost pressures moderated and supported the rise in purchasing activity as the rate of input price inflation softened to the slowest in five months. 

“Indian manufacturers registered softer increases in new business and output during August, albeit with rates of expansion remaining elevated by historical standards. Business confidence retreated, but firms scaled up buying levels in a bid to safeguard against input shortages,” the survey by the private agency noted.

 

Pranjul Bhandari, chief India economist, HSBC, said the Indian manufacturing sector continued to expand in August, although the pace of expansion moderated slightly. 

“New orders and output also mirrored the headline trend, with some panellists citing fierce competition as a reason for slowdown. Nevertheless, all three indicators remain well above their historical averages,” she added. 

On the output front, though it rose at a historically sharp pace, the rate of expansion moderated to the slowest since January. On the one hand, some panellists indicated that greater sales volumes and investment in technology supported production. 

“On the other hand, a few companies suggested that fierce competition and shifts in consumer preferences negatively impacted output at their units,” the survey noted.

The survey also noted that new export orders likewise increased at the weakest pace since the start of the 2024 calendar year. Yet, one-in-ten firms noted an improvement in international sales, which they associated with stronger demand from Asia, Africa, Europe and the US.

“On a positive note, the rise in input costs slowed sharply. Manufacturers increased their raw material buying activity in order to build safety stocks. In line with input costs, the pace of output price inflation also decelerated, but the deceleration was to a much smaller extent, thereby increasing margins for manufacturers. Business outlook for the year ahead moderated slightly in August, driven by competitive pressures and inflation concerns,” added Bhandari. 

On the job creation front, the survey noted that the labour market softened midway through the second fiscal quarter as a few firms trimmed headcounts. 

The August manufacturing PMI came below the flash estimate of 57.9 for the month, though it marks the manufacturing output rising for the 38th consecutive month since July 2021. 

“Nevertheless, the overall rate of employment growth was solid in the context of historical data,” the survey said.



                                                                                               

January 2023	55.4
February	55.3
April	56.4
May	57.2
June	58.7
July	57.8
August	57.7
September	58.6
October	57.5
November	55.5
December	56
January 2024	54.9
February	56.5
March	56.9
April	59.1
May	58.8
June	57.5
July	58.3
August	58.1
Source: HSBC