Strong Demand Revives Manufacturing PMI to 57.5 in October After Eight-Month Low

India's manufacturing sector saw a resurgence in growth at the beginning of the third quarter of the current financial year, as output accelerated due to increased new orders and international sales. This positive trend was highlighted in a private business survey released on Monday.

The HSBC final India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 57.5 in October, up from 56.5 in September, an eight-month low. An index figure above 50 signifies expansion, while a figure below 50 indicates contraction.

"Companies reported a quicker rise in order book volumes, stronger than the average seen in nearly 20 years of data collection. New product introductions and successful marketing initiatives were cited as key factors enhancing sales performance," the survey revealed.

Additionally, new export orders showed stronger growth, rebounding from the weakest increase in 18 months observed in September. Panel members noted new contract gains from regions including Asia, Europe, Latin America, and the US.

"Production volumes saw a significant boost in October, driven by increased activity in both consumer and investment goods categories. Companies attributed the latest output growth to buoyant demand, positive sales pipelines, and favorable market conditions," the survey noted.

Pranjul Bhandari, Chief India Economist at HSBC, highlighted that India’s manufacturing PMI surged in October, reflecting broadly improving operating conditions for the economy.

"Rapidly expanding new orders and international sales underscore strong demand growth in India's manufacturing sector. However, both input and output prices are rising due to ongoing inflationary pressures in materials, labor, and transportation costs," Bhandari added.

The survey also indicated that manufacturers hired additional staff at the start of the third financial quarter, with the hiring rate surpassing that of September.

"Approximately one-in-ten respondents reported an increase in employment, while only 1 percent reduced jobs, contributing to the first decline in backlogs in over a year," the survey noted.

On the inflation front, October data signaled stronger inflationary pressures within India's manufacturing sector. Input price inflation reached a three-month high, though it remained below its long-run trend. Output prices increased at a solid rate, driven by rising costs in freight, labor, and materials.

The October manufacturing PMI slightly exceeded the flash estimate of 57.4 for the month and marked the 40th consecutive month of output growth in the sector since July 2021.

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