Strong demand lifts manufacturing PMI to 59.2 in October, nearly a 17-year high

Manufacturing activity accelerated to 59.2 in October, nearly a 17-year high, driven by strong demand and the Goods and Services Tax rate reductions, according to a private sector survey.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index in October was higher than the 57.7 in September, which it said indicated a quicker improvement in the health of the sector. October’s 59.2 was just lower than the 59.3 recorded in August, which was the highest in 17-and-a-half years.

“Manufacturing sector conditions in India continued to strengthen in October, buoyed by GST relief, productivity gains and tech investment,” the report noted. “A faster increase in new orders boosted growth of output and buying levels, and the latter drove a near-record expansion in input inventories.”

According to the survey, companies attributed the increase in new orders to “advertising, buoyant demand and the GST reform”. 

“Moreover, the pace of expansion was sharp and stronger than that recorded in September,” the report said. “Similarly, growth of output quickened from the previous month.”

The report also noted that the October data showed that the uptick in sales growth was mainly on account of the domestic market, with new export orders increasing at a lower rate than earlier. 

“Looking ahead, future business sentiment is strong due to positive expectations around GST reform and healthy demand,” Pranjul Bhandari, chief India economist at HSBC said.

The report also noted that inflation in the cost of inputs also softened in October, which further helped companies. 

“The latest rise in overall expenses was modest, the weakest in eight months and well below the long-run series average,” the report said.