India’s Manufacturing Activity Hits Eight-Month Low in September
India's manufacturing sector experienced a slowdown in September, hitting its lowest level in eight months. A recent private survey indicated that growth in factory production, sales, and international orders has declined compared to earlier months.
Key Insights from the Survey
The HSBC India Manufacturing Purchasing Managers Index (PMI), produced by S&P Global, decreased to 56.5 in September, down from 57.5 in August. This trend marks a steady decline since April, when the index was at 58.8. However, it remains above the crucial 50-point mark, which indicates growth, and has stayed above the average for almost three years.
Employment and Purchasing Trends
The survey noted that, despite slower growth, there were increases in employment and the amount of goods purchased. Business confidence was stable, matching its long-term average. However, input costs and selling prices saw moderate increases.
Slower Export Growth
One reason for the drop in overall sales was the weaker growth in new export orders. This was the slowest expansion in this area in over a year and a half.
Manufacturing Pace and Cost Pressures
Factories continued to operate at a strong pace, but the growth rate softened, especially in consumer and capital goods. The survey indicated that input costs rose, particularly for chemicals, packaging, and metals. This has put pressure on manufacturers' profit margins.
Economic Outlook and Business Confidence
Pranjul Bhandari, chief economist at HSBC, explained that the slowdown in output and orders could affect hiring. The Reserve Bank of India (RBI) has raised its growth forecast for the fiscal year 2025 from 7% to 7.2%, citing improved demand in both rural and urban areas.
Inflation and Future Projections
Retail inflation increased slightly to 3.65% in August due to rising food prices but remains within the RBI's target range. The survey found that about 23% of manufacturers expect output growth in the next year, though overall business confidence has dropped to its lowest level since April 2023.
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Overall, while India's manufacturing sector is still expanding, the pace has slowed, with various factors influencing future growth and hiring decisions.
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