India's manufacturing sector activity growth eases in October on softer rise in output, new orders

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India's manufacturing sector activity growth eased in October as output and new orders rose at softer rates, while moderate cost pressures provided support and a buffer against a sharper decline, a monthly survey said on Monday (November ).

The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) fell to 54.7 in October from 55.1 in September. Still, it remained above its long-run average and comfortably above the neutral mark of 50.0.

In the Purchasing Managers' Index (PMI), a print above 50 means expansion, while a score below 50 denotes contraction.

A sustained improvement in demand was reflected in a further sharp rise in new business. Growth eased only marginally from September's seven-month high and remained strong by historical standards, the survey said.

India's manufacturing sector kept up a strong expansion in October even though output and new orders increased at a milder pace. Firms continued to add jobs and build inventories, although hiring was subdued and business confidence weakened.

"India's manufacturing PMI softened to 54.7 in October from 55.1 in the previous month, but remained firmly in expansionary territory and above its long-run average," said Pranjul Bhandari, Chief India Economist at HSBC.

Ms. Bhandari further said that "strong international demand pushed growth of new export orders to a six-month high, supporting a robust rise in output. Producers also increased input inventories to the greatest extent in eight months, building precautionary buffers to mitigate potential shortages and meet rising production requirements amid a volatile global environment."

Companies reported gains from a broad range of destinations, including Bangladesh, Canada, Indonesia, Nepal, Oman, Saudi Arabia, Sri Lanka, the U.K., the U.S. and UAE.

On the job front, higher production requirements and rising workloads encouraged a second successive monthly increase in factory employment, but the pace of job creation eased.

Notwithstanding continued demand growth, business confidence slipped in September and remained below its long-run average. Close to 18% of manufacturers anticipated higher output over the coming year, while the remainder were neutral.

Meanwhile, cost pressures moderated across all three broad areas of India's manufacturing industry monitored by the PMI survey. Although survey members reported higher prices for several materials and energy, the overall rate of input cost inflation retreated to its lowest since February.

"Although some material and energy costs increased, overall input and output price pressures eased slightly from the previous month," Ms. Bhandari said.

The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.

India / manufacturing and engineering / economy, business and finance / business (general)