India's Manufacturing PMI: India's manufacturing sector saw a slowdown in August, with the Manufacturing Purchasing Managers’ Index (PMI) easing to a three-month low, according to the HSBC India Manufacturing PMI report compiled by S&P Global. The index, released on Monday, recorded a reading of 57.5, down from 58.1 in July, though it remains above the long-run average of 54. Despite the dip, the PMI still indicated a strong improvement in operating conditions across the sector.
New Business Growth Eases, Export Orders Slow
Midway through the second fiscal quarter, new business orders rose sharply but at a slower pace, marking a seven-month low in expansion. Panelists cited factors such as increased advertising, brand recognition, and strong demand trends as driving forces behind the growth. However, heightened competition tempered the overall expansion.
Export orders also grew at a reduced rate, the weakest since the start of 2024. Despite this, one in ten firms reported an uptick in international sales, attributing the growth to increased demand from key markets in Asia, Africa, Europe, and the US.
Production Growth Moderates, Input Costs Ease
While manufacturing output continued to rise at a historically strong rate, the pace of growth moderated to its slowest level since January. Companies noted that greater sales volumes and investments in technology supported production. However, some firms reported that intense competition and shifting consumer preferences negatively impacted their output.
August brought some relief to goods producers in the form of moderating cost pressures. While purchasing prices continued to rise, the increase was the smallest in five months. The rise in costs was primarily due to higher prices for leather, minerals, and rubber. With input cost inflation slowing, manufacturers took the opportunity to rebuild their safety stocks, leading to the sharpest growth in input buying since April.
Inventory Levels Surge, Job Creation Slows
Manufacturers' efforts to rebuild inventories were reflected in a significant increase in input stocks, reaching one of the highest levels in the 19-and-a-half years of data collection. The report noted that reduced pressure on supplier capacity contributed to the stock-building efforts, with input lead times shortening for the sixth consecutive month in August.
However, job creation in the sector softened during this period, as some firms reduced headcounts. Despite this, the overall rate of employment growth remained solid compared to historical data.
Price Pressures and Confidence Weaken
Despite the easing of cost pressures, Indian goods producers raised prices in August at a rate that was the second-fastest in nearly 11 years. Firms reported sharing additional cost burdens with clients amid resilient demand. Nevertheless, competitive pressures and concerns over inflation dampened business confidence, leaving panellists the least optimistic since April 2023.