India's manufacturing PMI cools to 8-month low in Sept as output slows

'Mild setback' in manufacturing growth across India, according to HSBC survey

Growth in India's manufacturing sector slowed to an eight-month low in September as factory production and sales eased slightly, according to a business survey released on Tuesday.

The HSBC final India Manufacturing Purchasing Managers' Index, compiled by S&P Global, fell to 56.5 from 57.5 in August. A figure above 50 in the index denotes expansion in activity and below that signifies contraction.

Factory production and sales in September expanded at the slowest pace since January but net employment and quantity of purchases rose during the month and business confidence was broadly aligned with its long-run average. On the price front, there were moderate increases in input costs and selling charges.

“September data revealed a mild setback in manufacturing growth across India. For the third straight month, rates of expansion in factory production and sales receded, both of which were at their weakest since the turn of the year. Notably, international orders rose at the slowest pace in a year-and-a half,” according to the survey.

Another factor that constrained sales growth was a softer increase in new export orders. The rate of expansion was moderate and the least pronounced in a year-and-a-half.

"Momentum in India's manufacturing sector softened in September from the very strong growth in the summer months," said Pranjul Bhandari, chief India economist at HSBC.

The survey noted that growth softened in the consumer and capital goods segments and steadied at intermediate goods makers. Cost pressures ticked higher in September, with panellists citing increased chemical, packaging, plastic and metal prices.

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

Hiring growth receded in September, marked by a reduction in the number of part-time and temporary workers at some companies. Businesses that recruited extra staff cited projects in the pipeline. 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,” said Bhandari.

The September manufacturing PMI coincided with the flash estimate of 56.5 for the month, though it marks output rising for the 39th consecutive month since July 2021.