India’s manufacturing PMI resilient; surges to 55.3 in Oct

India’s manufacturing sector purchasing managers index (PMI) gained some momentum, even when the prices remained contained, the data released on November 1 showed. 

As per the S&P Global report, the country’s manufacturing PMI surged to 55.3 in October, as compared to 55.1 in September, thus indicating a stronger improvement in the health of the sector. Notably, manufacturing PMI has remained above the 50-mark for the 16th time consecutively. 

“The upward movement in the headline figure largely reflected stronger increases in employment and stocks of purchases,” S&P Global says. 

“Firms were able to secure additional work in October, taking the current sequence of growth to 16 months. Overall, factory orders increased at an above-trend pace that was nonetheless the weakest since June. New export orders also rose markedly, with the pace of expansion ticking higher,” it adds. 

Meanwhile, the country’s input buying rose at the slowest pace in 14 months. Consumer goods were the brightest area of manufacturing in October, with firms signalling a rise in output, overall sales and exports.

Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, says, “The Indian manufacturing industry again showed signs of resilience in October, with factory orders and production rising strongly despite losing growth momentum. Manufacturers continued to loosen the purse strings as they expect demand buoyancy to be sustained in the coming months. There was a marked rise in input purchasing, with firms adding to their inventories to better align with client purchasing. Capacities were again expanded to accommodate for improving sales.”

“The Future Output Index component indicated robust business optimism towards the year-ahead outlook for output. Consumer goods were the best-performing category in October, recording the greatest performances for output, total sales and exports,” she adds. 

The development comes at a time when the Reserve Bank of India (RBI), has slashed the gross domestic product (GDP) forecast for this fiscal year to 7% from 7.2%. The central bank is currently holding an out-of-turn monetary policy committee (MPC) meeting to write a report to the government, explaining its failure to curtail inflation. 

Notably, over the past 11 months, the headline inflation rate has remained above the RBI’s limit of 6%. In September, the consumer price index (CPI) inflation surged to 7.41%. Since May, the apex bank has hiked the repo rate by 150 basis points (bps) to 5.90%. 

“Price pressures were little-changed from September. The overall rate of cost inflation was the second-weakest for two years, ahead of that registered in the prior survey period. In turn, manufacturers limited hikes to output prices. The rate of charge inflation eased to the weakest since February,” S&P Global says.