India factory output growth, new orders ease to 4-month lows: PMI

Survey of manufacturers shows October job creation fastest in almost three years; inflation rates stay below trend

Image for representation. | Photo Credit: B. Velankanni Raj

 

India’s manufacturing production growth eased to a four-month low along with new orders in October, but there was a surge in new jobs and price pressures remained subdued, keeping producers optimistic about future prospects, as per the S&P Global India Manufacturing Purchasing Managers’ Index (PMI).   

The seasonally adjusted PMI for the month was mildly higher at 55.3, compared with September’s 55.1, but remained above its long-run average, indicating a stronger improvement in the manufacturing sector’s health, S&P Global said. A PMI reading above 50 indicates expansion. 

“The upward movement in the headline figure largely reflected stronger increases in employment and stocks of purchases,” S&P Global said, noting that export orders growth picked up pace even as overall factory orders rose at the weakest pace since this June.  

Outstanding business volumes hit a two-year high and some firms responded by hiring extra workers, as per the survey-based index, signalling that manufacturing jobs likely grew at one of the strongest rates since March 2005.

“Consumer goods emerged as the brightest area of the manufacturing sector in October,” the research firm said. “Firms in this segment signalled the fastest increases in output, overall sales and exports,” it added. Intermediate and investment goods sub-sectors also grew on all fronts, but at a slower pace than in September.  

The overall rate of cost inflation was the second-weakest for two years, spurring producers to limit output price increases, which grew at the slowest pace since February. Indian manufacturers remained confident of a rise in production volumes by October 2023, although the overall level of sentiment fell to a three-month low.   

Despite the loss in growth momentum, factory orders and production grew strongly, according to Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.   

“Manufacturers continued to loosen the purse strings as they expect demand buoyancy to be sustained in coming months. There was a marked rise in input purchasing, with firms adding to their inventories to better align with client purchasing,” she said, adding that firms added capacities to ‘accommodate for’ improving sales.