India’s manufacturing sector in September 2024 displayed clear signs of weakness. The Purchasing Managers’ Index declined to 56.5 from the previous 57.5 in August, according to the latest data from the HSBC India Manufacturing Purchasing Managers’ Index. While the index stays in expansion territory, this is the weakest performance since January 2024.
This deceleration reflects the broader trend in the second fiscal quarter, as the average PMI reading reached its lowest level since the three months ending December 2023. Intense competition and a softer rise in new export orders pulled on the index. The trends in demand were positive but at a slower rate of expansion, meaning more modest sales growth resulted.
Export orders slowed down in particular. The growth rate of export orders fell back to an 18-month low. Domestically, factories continued to operate strongly as ongoing strong performances from domestic clients kept overall order book growth above the long-term average. Still, production growth in consumer and capital goods segments slowed, and the intermediate goods segment performed flat. All this pushed the overall rate of expansion lower to an eight-month low.
While cost pressures did rise in September, with prices for chemicals, packaging, plastics. And metals all being inducted by manufacturers, the inflation rate was still mild when judged against historical standards. “Momentum in India’s manufacturing sector softened in September from the very strong growth in the summer months. Output and new orders grew at a slower pace. And the deceleration in export demand growth was particularly evident,” said Pranjul Bhandari, Chief India Economist at HSBC.
He added that the rate of increase in input prices accelerated in September, while factory gate price inflation slowed. Thereby intensifying the squeeze on margins. Weaker profit growth threatens to act as a drag on hiring demand. With employment growth slowing for the third month running. Manufacturers were still able to raise their selling prices in September. Despite purchasing costs and staff expenses continuing to rise, although the rate of inflation did slow to a five-month low.
In consequence, Indian manufacturers continued to ramp up their purchasing activity. Supported by ongoing new business growth and higher production requirements. However, the rate of expansion in input buying was the slowest so far this year.
Employment also saw a softened rate of growth. Some firms scaled back their reliance on part-time and temporary workers. Although those with ongoing projects still hired to help keep net employment growth intact.
Another positive development was the stabilization of backlog outstanding business volumes which had risen during the previous 11 months. This partly reflected slower rates of new business growth and subsequently job creation, enabling companies to catch up with workloads. Inventory trends remained mixed, as finished goods stocks continued to fall, whereas raw material holdings rose sharply. Moreover, it dented business confidence, with only 23 percent of manufacturing expecting output to grow over the next year. Causing overall optimism to slide to its lowest level since April 2023.
ANI
