Manufacturing PMI dips to 5-month low on slower new order growth in September

India's manufacturing activity slowed to the slowest in five months in September, with new orders growing at a slower pace, according to a private survey. The Purchasing Manager's Index (PMI) dropped to 57.5 in September, down from 58.6 in August, but remained in positive territory for the 27th consecutive month. Despite the slowdown, India's factory output grew at the highest rate among emerging markets in Asia. Employment rose due to increased production and new orders, while input costs eased. However, higher oil prices may increase input costs in the future.

India’s manufacturing activity continued to be driven by strong demand, but dipped to the slowest in five months in September as new orders grew at a slower pace, data from a private survey showed on Tuesday.

The new order index fell to 60.9 in September from 63.2 in August. Export orders fell to 55.5 in the month against 56.3 in August. (REUTERS)

The Purchasing Manager’s Index (PMI) cooled to 57.5 in September, S&P Global Market Intelligence said in a statement, lower than 58.6 in August, but remained in the positive territory for 27 consecutive months. A reading above 50 indicates expansion.

Although the seasonally adjusted manufacturing PMI was 1.1 points lower than in August, growth in India’s factory output was the highest among emerging markets in Asia, said Rahul Bajoria, head of Emerging Markets Asia Economics Research at Barclays, a research unit.

The new order index fell to 60.9 in September from 63.2 in August. Export orders fell to 55.5 in the month against 56.3 in August.

The employment index rose to 52.4 in September from 51.6 in the preceding month on increased production and elevated new orders. “Upbeat forecasts continued to drive job creation efforts and initiatives to replenish input stocks,” said Polyanna De Lima, associate director at S&P Global Market Intelligence

Input cost PMI eased 2.8 points to 51.6 in September, driven by lower raw material and labour costs. Higher oil prices, however, might increase input cost PMI in the future, Bajoria said in his research note. Output price PMI was up 0.6 points to 53.1, indicating that it kept up with increasing input costs.

The pricing power of manufacturing firms increased, Bajoria added. Higher cost pressures could restrict sales in the coming months, said De Lima. There were no pressures on suppliers’ delivery time and capacity of Indian manufacturers, S&P said.

The optimism in the current PMI numbers is expected to continue owing to strong domestic demand, said Bajoria. The core infrastructure index grew 12.1% annually in August over 8.4% in July. Weak exports weighed on manufacturing activity, he added.

Barclays research predicted a 6.3% GDP growth in 2023-24, down from the 2022-23 estimate of 7.2% on strong domestic demand.