PMI Manufacturing fell to 56.5 in September

With less new orders and consequent impact on output, manufacturing sector slowed down in September, a survey result by S&P Global released on Tuesday showed. The result, known as Manufacturing Purchasing Managers’ Index (PMI) fell to 56.5 in September as against 57.5 in August.

This is third successive months when rates of expansion in factory production and sales receded. Manufacturing has a share of over 17 per cent in Gross Value Added (GVA) and considered as biggest job multiplier. Manufacturing PMI is based on response of purchasing managers of 400 companies. Index above 50 shows expansion, while 50 means contraction.

“Momentum in India’s manufacturing sector softened in September from the very strong growth in the summer months. Output and new orders grew at a slower pace, and the deceleration in export demand growth was especially evident as the new export orders PMI was the lowest since March 2023,” Pranjul Bhandari, Chief India Economist at HSBC, said.

Hiring growth also receded in September, reflecting a reduction in the number of part-time and temporary workers at some firms. Those that recruited extra staff cited projects in the pipeline.

• Also read: India’s manufacturing PMI hits 59.1 in March, highest since 2008

The combination of job creation and slower increases in new business meant that companies were able to stay on top of their workloads. “Weaker profit growth might have an impact on companies’ hiring demand, as the pace of employment growth slowed for a third month,” added Bhandari.

There was also price pressure as survey report said cost pressures ticked higher in September, with panellists citing increased chemical, packaging, plastic and metal prices.

In historical terms, the rate of inflation was mild, however. “Input prices rose at a faster rate in September while factory gate price inflation eased, intensifying the compression on manufacturers’ margin,” Bhandari said.

As a result of rising purchasing prices, as well as greater labour costs and favourable demand conditions, Indian manufacturers lifted their charges in September.

The rate of inflation softened to a five-month low and was similar to that seen for input costs. September data highlighted another substantial increase in quantities of purchases among goods producers. The rise was supported by new business growth, positive client appetite and greater production requirements. Yet, input buying expanded at the slowest pace in the calendar year-to-date.

According to survey report, Inventory trends were mixed. The current sequence of falling stocks of finished goods that began more than seven years ago was stretched to September, while holdings of raw materials increased sharply again.

The latter was supported by a further improvement in average lead times. “Around 23 per cent of Indian manufacturers forecast output growth in the year ahead, while the remaining firms predict no change. Hence, the overall level of business confidence fell to its lowest since April 2023,” the report said.

• Also read: Services follow manufacturing; PMI rises to 60.5 in June