The growth of new orders and output by companies in the Indian manufacturing sector slowed in August, reaching a three-month low. A decrease from 58.1 in July to 57.5 was the headline Purchasing Managers Index (PMI) number that HSBC released on Monday.
Expansion is indicated by an index figure above 50, and contraction is indicated by a figure below 50.
Yet, as the rate of inflation in input prices slowed to its lowest level in five months, cost pressures eased and helped to sustain the increase in spending activity.
According to HSBC's chief India economist, Pranjul Bhandari, the growth of the Indian manufacturing sector persisted in August, albeit at a somewhat slower rate.
The headline trend was also reflected in new orders and output, with some panellists attributing the slowdown to intense competition. All three indicators, however, are still significantly above their historical averages, the speaker continued.
Output data
Regarding output, it increased at a historically rapid rate, but the rate of expansion slowed to its lowest point since January. On the one hand, a few panellists stated that increased sales volumes and technological investments helped to sustain production.
However, some businesses claimed that fierce rivalry and changes in customer preferences had a detrimental effect on production at their establishments, according to the survey.
PMI report |
Slow increase in export
According to the survey, there was the weakest increase in new export orders since the beginning of the 2024 calendar year. However, ten percent of businesses reported an increase in foreign sales, which they attributed to increased demand from the US, Europe, Asia, and Africa.
Raw materials purchase Increased
The rise in input costs has, thankfully slowed down significantly. In order to build safety stocks, manufacturers increased their purchasing activity for raw materials.
The rate of inflation of output prices slowed down in tandem with input costs, although it did so much more slowly, giving manufacturers greater margins. Due to increased competition and worries about inflation, the business outlook for the upcoming year somewhat cooled in August, according to Bhandari.
Employment generation
Regarding employment creation, the survey observed that as some companies reduced headcounts in the middle of the second fiscal quarter, the labour market loosened.
Although the manufacturing output increased for the 38th consecutive month since July 2021, the August manufacturing PMI fell short of the flash estimate of 57.9.
