Manufacturing PMI eased to 5-month low in September

New orders slow down, but firms are most optimistic so far in 2023 and sharply raised output costs

October 03, 2023 11:08 am | Updated 01:18 pm IST - NEW DELHI

Image for representation purpose only.

Image for representation purpose only. | Photo Credit: Reuters

India’s manufacturing sector activity moderated to a five-month low in September with new orders slowing down, as per the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI), which eased to 57.5 from 58.6 in August. A reading of 50 on the survey-based index reflects no change in activity levels. 

While inflation in input costs eased to the lowest in over three years, firms raised output charges at a sharper pace than the long-run average which could hurt sales prospects going forward. Firms cited higher labour costs combined with upbeat business confidence and buoyant demand, as the rationale for the price hikes effected in September.   

“Growth of new export orders softened from August’s nine month high, but remained sharp. Firms noted new business gains from clients in Asia, Europe, North America and the Middle East,” S&P Global Market Intelligence said in a note. 

Factories’ output rose at the slowest pace in five months, but was still above the long-term average and firms exuded the highest optimism about business prospects a year down the line so far in 2023. This prompted a pick-up in employment growth over August levels at a pace that the firm reckoned was strong by historical standards. 

“India’s manufacturing industry showed mild signs of a slowdown in September, primarily due to a softer increase in new orders which tempered production growth. Nevertheless, both demand and output saw significant upticks and manufacturers held a strongly positive outlook for production,” noted Pollyanna De Lima, the firm’s economics associate director. 

“Upbeat forecasts continued to drive job creation efforts and initiatives to replenish input stocks. Together, these indices point towards a favourable trajectory for the Indian manufacturing industry,” she added. However, the solid increase in output charges, despite receding cost pressures, could restrict sales in coming months, Ms. De Lima cautioned.   

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