Steady Growth Amid Challenges: India’s manufacturing activity experienced a five-month low in September, with the S&P Global Purchasing Managers’ Index (PMI) registering 57.5, down from August’s 58.6. Despite this dip, the sector maintained a solid performance, driven by robust demand that bolstered business confidence, even as inflationary pressures increased. This marked the 27th consecutive month that the PMI remained above the 50-mark, indicating expansion rather than contraction.
Factors Influencing Manufacturing: Although Indian producers reported a slight slowdown in growth in September, a significant surge in new orders sustained expansions in output, input procurement, and employment. Stable supply-chain conditions helped reduce input price inflation to its weakest point in over three years. However, factors such as higher labor costs, positive business sentiment, and strong demand contributed to an increase in factory gate charges.
New Orders and Exports: New orders, a key sub-component of the PMI, saw a softer but still sharp increase in September. Favorable demand trends, market dynamics, and effective advertising were cited as reasons for sales growth. Export orders also softened from the nine-month high reached in August but remained robust, with businesses gaining new clients from Asia, Europe, North America, and the Middle East.
Outlook and Inflation: Manufacturers held a positive outlook for production, anticipating strengthened demand in the next 12 months, which continued to drive job creation and inventory replenishment efforts. However, robust demand added to price pressures in September, with output charges rising despite lower cost pressures. Although India’s inflation eased slightly in August, it remained above the RBI target range of 2-6%.
Overall Trajectory: While the manufacturing sector experienced a modest slowdown, it remained on a favorable trajectory, driven by strong demand, positive sentiment, and export opportunities. Manufacturers anticipated increased output in the coming year, emphasizing the sector’s resilience in the face of challenges.
Note: The article summarizes India’s manufacturing PMI for September, highlighting factors impacting the sector’s performance and outlook.
