India’s manufacturing growth accelerates in October: PMI

Photo for representational purpose.
| Photo Credit: B. Jothi Ramalingam

Manufacturing activity in India’s private sector recovered in October, breaking a three-month streak of deceleration after hitting an eight-month low in September, as per the survey-based HSBC India Manufacturing Purchasing Managers’ Index (PMI) which inched up to 57.5 from 56.5 in the previous month.

A reading of over 50 on the PMI indicates an expansion in activity. The 400-odd factories surveyed for the index by S&P Global Market Intelligence reported an acceleration in output growth in October, with new orders and international sales driving the uptick.

Fresh export orders rebounded in October, after rising at the mildest pace in 18 months during September, with firms reporting new deals from clients in Asia, Europe, Latin America and the US. Production volumes increased, led by robust gains in the consumer and investment goods categories, with companies referring to demand buoyancy, positive sales pipelines and favourable market conditions as key factors. 

However, inflation pressures increased as input costs rose at a three-month high pace, with firms attributing most of these pressures to freight, labour and material costs. In response, companies opted to increase their output price at a solid rate that outpaced the trend.

Broadly, companies ramped up hiring from September activity, with about 10% of surveyed firms reporting higher staff even as 1% of companies shed jobs. Firms also significantly scaled up pre-production inventories by piling up input stocks at a pace that was one of the ‘most marked’ in nearly 20 years of data collection, S&P Global said.

Importantly, confidence levels also improved from among businesses from September, when they had hit the lowest level since April 2023. Just around 23% of surveyed firms had expected output growth a year ahead, while the remaining firms had predicted no change.

In October, Indian manufacturers became more optimistic regarding future output volumes, S&P Global noted, with the level of positive sentiment “above the average” seen over 13 and a half years.

“To start the third fiscal quarter, business confidence is also very high due to expectations of continued strong consumer demand, new product releases, and sales pending approval,” reasoned Pranjul Bhandari, chief India economist at HSBC, who linked the pick up in the PMI to broad improvements in the economy’s operating conditions.

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