The cooling of manufacturing sector conditions in India continued in October with both factory orders and production rising at the weakest rates for two years, according to IHS Markit India Manufacturing Purchasing Managers' Index (PMI) released on Friday.
Subsequently, job creation softened to a six-month low while companies were reluctant to hold excess stock and lowered input buying in response. Meanwhile, business confidence slipped to its lowest level in over two-and-a-half years.
In another sign of subdued growth conditions, input costs declined for the first time in over four years.
The headline seasonally adjusted IHS Markit India Manufacturing PMI fell from 51.4 in September to a two-year low of 50.6 in October, highlighting only a marginal improvement in the health of the manufacturing industry.
"PMI data for October showed a continuation of manufacturing sector weakness in India with sales growth softening to the slowest in two years," said Principal Economist at IHS Markit Pollyanna de Lima.
"Weakening demand had a domino effect in the manufacturing industry, knocking down rates of increase in production, employment and business sentiment. With quantities of purchases contracting for the third month in a row, input costs fell for the first time in over four yearsduring October," she said in a statement.
Growth was restored in capital goods and softened in the consumer goods category, while a quicker contraction was registered at intermediate goods makers.
Although sales increased for the 24th consecutive month, the upturn was the slowest over this period. Growth at firms that were able to secure new work was hampered by weak demand at other companies.
Similarly, output expanded at the slowest rate in two years. According to panellists that raised production, this reflected new business gains. Companies that signalled lower output mentioned competitive pressures and subdued market demand.
New export orders rose modestly but at a quicker pace than in September, suggesting that the domestic market was the key source of weakness.
Challenging market conditions, coupled with delayed client payment, dampened business confidence in October. Manufacturers were at their least upbeat towards the 12-month outlook for production since February 2017.
The IHS Markit India Manufacturing PMI is compiled from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.
IHS Markit is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government.
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