India’s manufacturing PMI cools down to 55.1 in Sept but still in expansion territory

India’s manufacturing activity lost a bit of momentum in September as it hit 55.1, as against August’s 56.2. Despite cooling down from August, rates of expansion remained historically high, said S&P Global India Manufacturing PMI. The S&P report stated that manufacturing PMI was in expansion for the 15th month in a row.

The report added that companies hired extra workers and acquired more inputs in order to accommodate higher sales. “The upturn in input buying was aided by cooling price pressures. Purchasing costs rose at the slowest pace in just under two years, while output charge inflation receded to a seven-month low,” it said.

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said, “The latest set of PMI data show us that the Indian manufacturing industry remains in good shape, despite considerable global headwinds and recession fears elsewhere.”

Factory orders continued to increase at the end of the second quarter, but has eased to its weakest since June. There was a greater demand from domestic and international clients. Export orders increased too – the sixth in consecutive months, and the fastest since May.

New orders, international sales and output increased in each of the three broad areas of the manufacturing industry, it said.

Good producers saw a weaker inflationary environment in September as input costs rose at the slowest pace since October 2020. As much as 8 per cent companies reported higher purchasing prices, but 91 per cent signalled no change. “This retreat in cost inflationary pressures helped curtail the latest upturn in selling prices, which was modest and the slowest in seven months,” it said.

Employment rose in the quickest pace in three months. Despite this, companies saw a further increase in outstanding business volumes. Backlogs rose at a slight rate.

“To fulfil sales requirements, Indian manufacturers dug deeper into their inventories in September. Stocks of finished goods fell at the fastest pace since February,” it said.

"Once again we saw businesses become more confident in the outlook as inflation worries were tamed. The overall level of positive sentiment seen in September was the best in over seven-and-a-half years. That said, currency risks and the impact of a weaker rupee on inflation and interest rates could derail optimism during October,” said De Lima.

Also read: Manufacturing PMI hits 56.2 in August vs 56.4 in July; sectoral hiring remains muted

Also read: Services activity grew faster in Aug; hiring at over 14-yr high: PMI