Manufacturing surges in October, but job losses persist

Producers recorded the strongest improvement in overall operating conditions since February, and business optimism hit a six-month high.

November 01, 2021 12:09 pm | Updated 12:09 pm IST - NEW DELHI:

Representational image. File

Representational image. File

India’s manufacturing sector expanded for the fourth month in a row in October, with the IHS Markit Purchasing Managers’ Index (PMI) rising to 55.9 from 53.7 in September.

Manufacturing jobs continued to decline even though producers recorded the strongest improvement in overall operating conditions since February, and business optimism hit a six-month high. A reading of 50 on the PMI indicates no change in output levels.

Overall new orders grew at the fastest pace in seven months, while factory output also increased at the strongest pace since March. New export orders surged at a solid pace as well, the quickest in three months, IHS Markit said.

Input purchases also increased at the fastest pace since April as producers geared up to cope with the surfeit of new orders. However, the cost of inputs began to pinch, with the overall inflation for them surging to a 92-month high. “Anecdotal evidence highlighted higher chemical, fabric, metal, electronic component, oil, plastic and transportation costs,” IHS noted.

As capacities are still not fully utilised and Government norms are in place surrounding shift work, employment continued to decline. The silver lining — the rate of job shedding was marginal in October.

“With companies gearing up for further improvements in demand by building up their stocks, it looks like manufacturing activity will continue to expand throughout the third quarter of 2021-22 should the pandemic remain under control,” said Pollyanna De Lima, economics associate director at IHS Markit.

“Upbeat business confidence and projects in the pipeline should also support production in the coming months,” she said, before emphasising that input cost inflation that accelerated substantially in October was a matter of concern.

“Input cost inflation is at a near eight-year high — as strong global demand for scarce raw materials continued to push up prices for these items. Some manufacturers hiked their fees in response, but for now the overall rate of charge inflation was moderate,” Ms. De Lima said.

IHS Markit said in a note that confidence among producers was boosted by predictions that business conditions would improve further. “Firms also intend to develop new products, invest in marketing and focus on customer relations to support growth in the year ahead. The overall degree of optimism strengthened to a six-month high,” it pointed out.

The IHS Markit India Manufacturing PMI is compiled from responses to questionnaires sent to around 400 purchasing managers. The panel is stratified by detailed sector and company workforce size, based on contributions to the GDP. The latest index was based on responses from producers received between October 12 and 25.

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