India’s Manufacturing PMI Declines to 54.7 in October Amid Surge in Export Orders
India’s manufacturing activity showed signs of slowing in October, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) dropping to 54.7 from 55.1 in September. Despite the decline, the index remains above the neutral mark of 50, indicating continued expansion. Strong overseas demand helped cushion the slowdown, supporting production and new orders, according to a monthly survey released on Monday.
New export orders increased at their fastest pace in six months, driven by demand from countries such as Bangladesh, Canada, and the US. While growth in new business eased slightly from September’s seven-month high, it remained robust. Pranjul Bhandari, chief India economist at HSBC, noted that strong international demand played a key role in this growth.
Output Rises, but Hiring Growth Remains Subdued
The increase in factory output was supported by favorable demand trends and successful marketing campaigns. Manufacturers continued to build inventories, with input inventories rising at the fastest pace in eight months. This was a precautionary measure against potential shortages in a volatile global environment. Finished goods stocks also increased at a record pace, reflecting buoyant demand.
However, the pace of raw material purchasing growth slowed to its weakest level in 64 months. Factory employment rose for the second consecutive month, driven by higher production requirements. Despite this, job creation slowed compared to September, with capital goods manufacturers reducing staff during the month.
Input Cost Inflation Falls to Lowest Since February
Cost pressures across India’s manufacturing sector moderated, with overall input cost inflation declining to its lowest level since February. While some manufacturers reported higher prices for certain materials and energy, the overall trend showed easing inflation. Selling price inflation also weakened, marking the slowest increase in output prices in nearly four years.
Bhandari commented that although some material and energy costs rose, the overall input and output price pressures eased slightly from the previous month.
Business Confidence Weakens
Despite ongoing demand growth, manufacturers expressed reduced optimism about the future. Business confidence dipped from September and remained below its long-run average. Approximately 18% of manufacturers anticipated an increase in output over the coming year, while the remainder held neutral expectations. This optimism was supported by new client inquiries and demand for industrial automation and technology solutions.
The HSBC India Manufacturing PMI is compiled by S&P Global based on responses from around 400 manufacturers.
