New orders boosted the output in the manufacturing sector, as Purchasing Managers’ Index (PMI) rose to 58.6 in August, which is second best in nearly three years. However, inflation remains a big worry for the manufacturers. Also, job creation growth was slower.

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PMI, prepared by S&P Global on the basis of survey among purchasing executives of 400 companies, was 57.7 in July. Rise in PMI has been recorded after a gap of two months. Manufacturing has a share of over 14 per cent on Gross Value added (GVA) in India and considered as biggest job provider.

“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 that the sector looks set to provide a strong contribution to second quarter (fiscal) economic growth. 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,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.

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The agency reported that firms geared up to handle rising demand by scaling up buying levels and rebuilding their input stocks at the second-strongest pace in 18-and-a-half years of data collection. On the price front, cost inflationary pressures accelerated but there was a slower uptick in selling charges. “Demand strength was pivotal to August’s robust performance, spurring the fastest upturn in new orders since January 2021. Competitive pricing and advertising were also cited as factors behind sales growth. International sales added to manufacturers’ total order books,” added the agency.

Talking about job scenario, the agency said that Indian manufacturers reportedly hired a combination of permanent and temporary staff on both part- and full-time bases. New order growth was cited as the main reason behind job creation. “Overall employment rose at the slowest pace in four months, but one that was above the series trend,” it said.

Price signals were mixed in August, with a quicker increase in input costs contrasting with a softer uptick in factory gate charges. The latter rose at the slowest pace in four months, whereas cost inflation picked up to its strongest in a year, with companies noting higher fees for cotton, foodstuff, rubber, steel and machinery spare parts.

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Talking about the outlook, the agency said that upward revisions to marketing budgets, better customer relations, demand strength and a healthy number of client enquiries underpinned upbeat forecasts among manufacturers regarding the year-ahead outlook for production. Although historically elevated, the overall level of positive sentiment slipped to a three-month low due to inflation concerns.

According to De Lima said the near-record increases in buying levels and input stocks underscore firms’ methodical approaches in ensuring that production lines are not interrupted. To aid this, manufacturers also hired additional workers again in August. “The presence of stronger cost inflationary pressures serves as a reminder of the challenges inherent in managing growth. Firms addressed rising input prices by lifting selling charges. However, the need to maintain competitiveness helped restricted charge inflation,” she said.

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