Slowdown in new orders pulls manufacturing PMI to 4 month low in September

India's manufacturing PMI fell to 57.7 in September from 59.3 in August, as US tariffs slowed orders and output, though GST rate cuts lifted business confidence and export demand

The manufacturing sector’s expansion hit a four-month low last month, pulled down by a moderation in new orders as United States’ tariffs started weighing on the economy, showed a private survey on Wednesday.

 

The headline HSBC purchasing managers index figure, compiled by S&P Global, for September stood at 57 compared to a record high of 59.3 in August. A figure above 50 in the survey denotes expansion in activity while below that signifies contraction. The headline figure has been in the expansion zone for the 51st month running.

 

“Data for September highlighted continued growth across India’s manufacturing industry, albeit with a mild loss of momentum. New orders, output and input buying all rose at the slowest rates since May, while job creation retreated to a one-year low,” the survey said.

 

 

Still, companies were confident about production, with reduction in goods and services tax (GST) rates boosting optimism.

 

Pranjul Bhandari, chief India economist at HSBC, said the September headline index softened but was well above the long-term average. New export orders increased at a faster rate in September, indicating demand outside the United States might have offset the impact 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, although US tariffs remain a strong headwind to the economy," she said.

 

International orders picked up at the end of the second quarter, as Indian manufacturers recorded demand improving in Asia, Europe, the Americas and West Asia.

 

"Survey members indicated that input costs continued to increase in September. Panel members reported greater battery, cotton, electronic component and steel prices. The overall rate of inflation was solid and the quickest since May, though remained below its long-run average," the survey said.

 

Selling charges increased faster than that for input costs. “Monitored firms suggested that greater outlays on labour, raw materials, and transportation prompted hikes in output prices, which were facilitated by positive demand trends. The rate of charge inflation reached a near 12-year high. Indian companies continued to signal upbeat forecasts for production in the coming 12 months. Moreover, the overall level of confidence rose to a seven-month high,” the survey said.

 

In addition to favourable demand conditions, investment in marketing and improved customer relations, panellists identified GST cuts as a tailwind to growth.

 

On the jobs front, the survey noted that Indian goods producers took on extra staff in September, but the rate of job creation was modest and the slowest in a year. Only 2 per cent of companies reported headcount growth.

 

“Despite weak job creation relative to sales growth, outstanding business volumes increased only marginally in September. The pace of accumulation was below that seen in August and its long-run average.”