India’s manufacturing PMI eases to three-month low in August at 57.5

India’s manufacturing PMI eased to three-month low in August, showed HSBC India Manufacturing Purchasing Managers’ Index compiled by S&P Global, on Monday. Manufacturing activity in India stood at 57.5 in August, which is below July’s reading of 58.1, but above the long-run average of 54. The report stated that the figure signalled a substantial improvement in operating conditions. 

“Indian manufacturers registered softer increases in new business and output during August, albeit with rates of expansion remaining elevated by historical standards. Business confidence retreated, but firms scaled up buying levels in a bid to safeguard against input shortages. The latest upturn in pre-production inventories was one of the strongest seen in 19-and-a-half years of data collection. One factor that supported the rise in purchasing activity was a moderation in cost pressures. The rate of input price inflation softened to the slowest in five months. Concurrently, demand resilience meant that firms were comfortably able to share additional cost burdens with their clients by lifting selling prices,” stated the report. 

Pranjul Bhandari, Chief India Economist at HSBC, said, “The Indian manufacturing sector continued to expand in August, although the pace of expansion moderated slightly. New orders and output also mirrored the headline trend, with some panellists citing fierce competition as a reason for slowdown. Nevertheless, all three indicators remain well above their historical averages.” 

Bhandari said that manufacturers increased their raw material buying activity in order to build safety stocks. The pace of output price inflation decelerated but to a much smaller extent. Business outlook moderated slightly in August, driven by competitive pressures and inflation concerns.

New business rose sharply but competitive conditions dampened growth. New export orders increased at the weakest pace since the start of 2024 calendar year, but one-in-ten firms noted an improvement in international sales. 

Purchasing prices rose to the weakest degree in five months, while input cost inflation receded. Input buying growth was strongest since April, the report added. “Not only did input inventories increase further in August, but also to one of the greatest extents seen in 19-and-a-half years of data collection,” stated the report.

“Goods producers also indicated that backlogs of work were broadly unchanged since July. Job creation softened midway through the second fiscal quarter as a few firms trimmed headcounts. Nevertheless, the overall rate of employment growth was solid in the context of historical data,” stated the report.