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India’s manufacturing growth accelerates in October: PMI

Submitted by admin on November 7th, 2024

Cost pressures rose to its highest level in three months since May, New export business increased from an 18 months low expansion in September.

Survey-based HSBC India Manufacturing PMI for the October report, margins increased but were slower to September’s eight-month low of 56.5; the figure in October rose to 57.5.

In statistics, a PMI reading above 50 means there is an actual increase in activity. Out of the 400 plus factories in the index compiled by S&P Global Market Intelligence, there was reported improvement of output growth in October due to new orders and international sales.

Newly received export orders also picked up in October after increasing at the slowest pace in 18 months in September as firms received new contracts from clients in Asia, Europe, Latin America and United States. More firms verified that they raised production volumes for the period under review as those in the consumer and investment goods subsectors recorded good volume growth citing factors such as demand strength, sales orders and favourable market trends.

India’s manufacturing sector private pulled up in October improving from the previous three months decline after it stood at an eight month low in September as per the survey based HSBC India Manufacturing Purchasing Managers ‘Index (PMI) which rose to 57.5 from 56.5 in the previous month.

This is an important point because a PMI reading of more than half always depicts an increase in activity. S&P Global Market Intelligence surveyed 400 factories for the index and observed that output growth has picked up in October driven by new orders and export business.

Export orders characterized by new business returned to growth in the October period following the slowest increase in 18 months in September as companies noted new contracts from clients in Asia, Europe, Latin America, and US. Production activities also rose, especially in consumer goods and investment goods where firm pointed to demand pressures, expected sales orders and favourable market environment as motivation.

Nevertheless, inflationary pressures accelerated as producers purchase inputs at a three-month high rate, where many firms sourced most of these pressures from freight, labour cost, and materials. In response, the likelihood was that companies chose to boost the output price at an even higher rate than the trend.

Overall, firms hiring intensified from September level, while about 10% of the concerned enterprises employed more people and 1% laid off workers. Firms also vastly increased pre-production inventories by stockpiling inputs in a manner that was one of the ‘most pronounced ’ in almost two decades of research, S&P Global said.

More so, confidence levels were also up from among businesses from September when they had dropped the lowest since in April 2023. Less than a quarter – slightly above 23% – of the firms that the survey was carried out on had expected an increase in output a year prior, with the rest having not expected any change.

S&P Global report that in October, manufacturers in India became more optimistic on the future output volumes they expect: The level of the optimism was “above the average” and had been observed in over 13 and a half years.

“To start the third fiscal quarter, business confidence is also very high because of further anticipated robust consumer demand, new product launches, and sales awaiting clearances,” said Pranjul Bhandari, chief India economist at HSBC, who pointed rise in the PMI to general enhancement of operating conditions of the economy.

“Meanwhile, input and output prices are both increasing as a result of persistent inflationary pressures in materials, labour, and transportation costs,” she noted.