India’s manufacturing sector continued to grow on a solid footing with factory growth accelerating at the fastest pace in three months and new orders, and output increased at the quickest rates in nearly three years in August, a private survey showed.
S&P Global’s Manufacturing Purchasing Managers’ Index for India rose to 58.6 in August from 57.7 in July, the highest since May. A Reuters poll pegged the data point at 57.5.
The survey also showed that job creation was at a four-month low and cost inflation surged to a one-year high. New orders and output expanded at the fastest pace since January 2021 and October 2020, respectively while export orders accelerated to the fastest rate in 10 months. The survey cited competitive pricing and advertising as factors behind sales growth.
Business confidence for the next 12 months slipped to a three-month low due to inflation concerns.
Data released Thursday showed that India’s economic growth rose to 7.8 per cent in the April-June quarter of 2023-24 against 13.1 per cent in the year-ago period. However, slowing exports weighed on manufacturing growth despite easing supply chain bottlenecks and global commodity prices.
“The PMI results for India painted a vibrant picture of the nation’s manufacturing landscape in August. Robust and accelerated increases in new orders and production suggest… strong contribution to second quarter (fiscal) economic growth,” noted Pollyanna De Lima, economics associate director at S&P Global.
India’s manufacturing PMI numbers have now been in the expansion point, i.e., above the 50-mark which separates growth from contraction, for 26 straight months. This is the longest stretch since March 2020 when the Narendra Modi-led government imposed lockdowns owing to the Covid-19 breakout.
“Companies’ strategic focus towards a global orientation were evident via a sharp and quicker expansion in international sales. Export-centric tactics should help ensure that production remains on an upward path in the coming months.”
Input costs quickened at the fastest pace in a year in August. However, not all of these costs were passed on to clients, as output prices rose at their weakest rate in four months.
“The presence of stronger cost inflationary pressures serves as a reminder of the challenges inherent in managing growth … the need to maintain competitiveness helped restricted charge inflation,” De Lima added.
