A sustained improvement in demand conditions boosted new order intakes at Indian manufacturers during August, which in turn pushed output growth to a nine-month high.

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) was little-changed from July's reading of 56.4, posting 56.2 in August and signalling the second-strongest improvement in operating conditions since last November.

A reading above 50 indicates an overall increase in output compared to the previous month.

Indian manufacturers continued to benefit from the absence of Covid-19 restrictions, with rates of growth for both output and new orders picking up yet again to the strongest since last November, says Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

Production volumes were also supported by a pick-up in exports and upbeat projections for the year-ahead outlook, the survey shows, adding that firms were at their most optimistic for six years.

On the supply side, the results showed a further shortening of delivery times and a slower upturn in prices charged by vendors.

The rate of input cost inflation softened to the weakest in a year, but the passing of higher freight, labour and material prices to clients kept the pace of increase in output prices little-changed from July.

Factory orders rose at the quickest pace since last November, boosted by strengthening demand conditions, new client wins and fruitful advertising, the survey shows.

“This robust performance was complemented by a fourth successive monthly slowdown in the rate of input cost inflation, which slipped to the lowest in a year amid softer pressures from commodity prices,” says Lima.

"Firms welcomed the weaker increase in input costs with and upward revision to output forecasts amid renewed hopes that contained price pressures will help boost demand. Inflation concerns, which had dampened sentiment around mid-year, appear to have completely dissipated in August as seen by a jump in business confidence to a six-year high," Lima adds.

There was a moderate upturn in factory gate charges in August as monitored companies lifted their fees in line with the passing on of higher freight, labour and material costs to clients.

International markets gave impetus to total sales, as seen by a marked and quicker increase in new export orders halfway through the second fiscal quarter, the survey shows.

The survey also reveals that recent inflation concerns somewhat faded, as business sentiment strengthened further from June's 27-month low. Although manufacturers continued to signal higher prices for a wide range of materials in August, the overall rate of cost inflation softened to a one-year low as commodity prices (particularly aluminium and steel) moderated.

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