August PMI: New turnover in manufacturing sector and slight increase in production, PMI figures released

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New Delhi| India’s manufacturing sector growth slowed in August as production and sales grew at the lowest rate since January. Meanwhile, competitive pressures and inflation concerns disrupted business confidence. This came to light in a monthly survey on Monday. The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) stood at 57.5 in August. This figure is lower than the July reading of 58.1, but it remained above the long-term average of 54.0, indicating a substantial improvement in operating conditions.

In the language of PMI, a print above 50 indicates expansion, while a score below 50 indicates contraction. “The Indian manufacturing sector continued to expand in August, although the pace of expansion remained a bit slow”, said Pranjul Bhandari, chief Indian economist at HSBC. New orders and output also reflected the headline trend, with some panelists citing fierce competition as the reason for the sluggishness

According to the survey, new business grew rapidly in the second quarter of the financial year, but the pace of expansion fell to a seven-month low. Similarly, new export orders grew at the lowest pace since the start of the 2024 calendar year.

On the prices front, goods producers benefited from a reduction in cost pressures during August, according to Bhandari. “The positive thing is that the increase in input costs decreased rapidly”, Bhandari said. Manufacturers increased their raw material purchasing activity to build up security stocks. In line with input costs, the pace of output price inflation also decreased, but this decrease was to a much lesser extent, leading to increased margins for manufacturers.” The survey further noted that job creation decreased in the middle of the second fiscal quarter as some firms cut back on staff. Nevertheless, the overall rate of employment growth remained solid in terms of historical data. According to the survey, business confidence has decreased and panelists are at their lowest optimistic level since April 2023. “The business outlook for the coming year softened slightly in August, driven by competitive pressures and inflation concerns”, Bhandari said Meanwhile, government data on Friday showed India’s economic growth fell to a 15-month low of 6.7 per cent in April-June 2024-25, largely due to poor performance by the agriculture and services sectors. Gross domestic product (GDP) grew 8.2 percent in the June quarter of 2023-24. HSBC India Manufacturing PMI is compiled from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers on behalf of S&P Global.