India’s manufacturing growth softened for the second straight month as demand eased, which alongside bigger increases in the cost of raw materials had an impact on business confidence, a private survey showed on Wednesday.
S&P Global Manufacturing Purchasing Managers’ Index showed factory activity dropped to an eight-month low of 55.5 in October from 57.5 in September. A Reuters poll had forecast an uptick of 57.7.
However, the index has remained over the 50-mark, which separates expansion from contraction, for the 28th consecutive month.
“India’s manufacturing sector generated substantial growth in October, despite a challenging global economic environment. Still, insights from surveyed purchasing managers pointed to the deceleration of several measures,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
“Consumer goods was behind most of the slowdown, recording considerably softer increases in sales, production, exports, input inventories and buying levels,” De Lima added.
Competitive pressures and weak demand at certain plants weighed on factory growth, data showed.
Granular data highlighted a particularly marked slowdown in the consumer goods sub-sector. Although a further increase in new orders was a positive development, October data signalled a deceleration in growth since September, the statement said.
The expansion in international demand slowed to a four-month low.
Concerns around demand and inflation dampened business confidence in October. The future output sub-index fell to its weakest since May after touching a nine-month high in September.
Input prices ticked higher last month, leading companies to pass on some of the extra costs to clients, although the rate of increases in selling prices decelerated.
“Qualitative evidence from the future output question revealed an interesting finding, as reports of rising inflation expectations were expected to dent demand and subsequently production growth over the course of the coming 12 months,” added De Lima.
