India's Manufacturing PMI At 5-Month Low In September Due To Softer Growth In New Orders

India's manufacturing PMI dropped lowest in five months at 57.5 in September, compared to 58.6 in the previous month. The country's factory activities witnessed a mild slowdown due to softer rise in new orders which is the largest sub-component of the PMI. Also, September data showed a let-up in the recent surge in costs faced by Indian goods producers.

De Lima, Economics Associate Director at S&P Global Market Intelligence, said, "India's manufacturing industry showed mild signs of a slowdown in September, primarily due to a softer increase in new orders which tempered production growth. Nevertheless, both demand and output saw significant upticks, and firms also noted gains in new business from clients across Asia, Europe, North America and the Middle East."

On order books, S&P's PMI note said that new orders, the largest sub-component of the PMI, rose at a softer pace in September. That said, the latest increase was sharp and historically strong. Where an expansion in sales was reported, survey participants cited favourable demand trends, positive market dynamics and fruitful advertising.

It highlighted the growth of new export orders softened from August's nine-month high, but remained sharp. Firms noted new business gains from clients in Asia, Europe, North America and the Middle East.

Further, S&P's data said September data showed a let-up in the recent surge in costs faced by Indian goods producers. After quickening to a one-year high in August, the rate of inflation receded to its lowest mark in over three years. Panellists indicated paying more for copper, electronic components, foodstuff, iron and steel but noted lower costs for aluminium and oil.

Despite PMI at a 5-month low, India's latest reading remains firmly above the no-change mark of 50.0 and its long-run average (53.9), therefore signaling a sharp rate of expansion.

De Lima added, "Manufacturers held a strongly positive outlook for production, as they expect demand to strengthen over the course of the coming 12 months. Upbeat forecasts continued to drive job creation efforts and initiatives to replenish input stocks. Together, these indices point towards a favourable trajectory for the Indian manufacturing industry."

However, De Lima also said, "While robust demand was supportive of production growth, it added to price pressures in September. The solid increase in output charges signalled by the PMI data, which occurred in spite of a notable retreat in cost pressures, could restrict sales in the coming months."

According to S&P, Indian manufacturers were confident that output volumes would increase over the course of the coming 12 months, with the overall level of positive sentiment improving to its highest in 2023 so far. Buoyant customer appetite, advertising, and expanded capacities all boosted optimism, according to anecdotal evidence.