India manufacturing PMI eases to 57.7 in Sep, selling prices hit 12-yr high

India’s manufacturing activity continued to expand in September, but at a slower pace, with the Manufacturing Purchasing Managers’ Index (PMI) standing at 57.7, down from 59.3 in August, according to data compiled by S&P Global.

 

The September manufacturing PMI reading marked the weakest improvement in sector health since May, though it remained well above the neutral 50 threshold that separates expansion from contraction.

 

Pranjul Bhandari, chief India economist at HSBC, noted, "The September headline index softened, but it remained well above the long-term average. New export orders increased at a faster rate in September, indicating demand outside of the US might be offsetting any decline in demand from the US as a result of tariffs. Business confidence, as indicated by expectations for future output, showed a big jump in September, potentially reflecting optimism about the boost in demand from the cuts in goods and services tax (GST), although US tariffs remain a strong headwind to the economy."

 

Data suggests that the 50 per cent tariffs imposed on Indian goods by US President Donald Trump may be starting to weigh on the Indian economy, which has otherwise been the fastest-growing country this year.

 

 

Slowdown driven by softer new orders

  September PMI was also below the preliminary estimate of 58.5. The slowdown was driven by softer new orders and output, both of which grew at the weakest rate in four months. Survey respondents cited rising competitive pressures as a drag on growth, though export orders improved compared with the previous month. 

Job creation fell to its weakest level in a year

 

Job creation declined to its weakest level in a year, with only two per cent of companies reporting workforce expansion. Despite this, business sentiment jumped to a seven-month high, supported by recent cuts in Goods and Services Tax (GST) rates and solid global demand.

 

The growth rate in August touched a 16-month high, well above the long-term average. Indian manufacturers also continued to expand their workforce, with employment rising for the eighteenth straight month in August. Although job creation slowed to its weakest pace since November 2024, it remained historically strong.

 

Input costs rose sharply

 

The survey also showed that input costs rose sharply in September, notably in batteries, cotton, electronic components, and steel, while selling prices increased at the fastest pace since 2013, reflecting a near 12-year high in output charge inflation.

 

Export orders up

 

At the end of the second fiscal quarter, there was a pick-up in growth of the international orders as the manufacturers witnessed improvements in demand from Asia, Europe, the Americas, and the Middle East.

 

Inventories

 

For the ninth time in ten months, manufacturers reported a fall in stocks of finished goods. According to them, the growth of sales has outpaced that of production in recent months, and orders were often fulfilled from inventories. On the other hand, stocks of purchases increased sharply in September. The rate of accumulation was one of the most pronounced in a year and a half.