India's Manufacturing Growth Slows Sharply In August; PMI Hits 5-Year Low At 52.8: HSBC

New Delhi, Sep 2 (KNN) India’s manufacturing sector continued to expand in August, but growth slowed sharply as output and new orders increased at their weakest pace in five years, according to the HSBC India Manufacturing PMI.

The seasonally adjusted PMI fell to 52.8 in August from 53.5 in July, marking the weakest improvement in manufacturing sector conditions in five years and remaining below the long-term average of 54.2.

Demand, Output Growth Lose Momentum

Pranjul Bhandari, Chief India Economist, HSBC, said, “India’s final manufacturing PMI slipped to 52.8 in August, extending its decline for a third consecutive month. The output index fell to its lowest level since August 2021, signalling that production is still expanding but at a markedly slower pace.” 

New business continued to rise at a marked pace, but growth was the slowest in five years as firms reported challenging market conditions and subdued demand for some products. Consumer goods were the only industrial group to record stronger demand.

Export orders also increased, with gains reported from markets including Australia, Germany, China, Spain, Thailand and the US. However, international order growth eased from July.

Production volumes continued to increase strongly, although the pace of expansion also slowed to a five-year low. Manufacturers attributed the moderation to weaker demand and slower growth in new orders.

Employment Falls for First Time in 2.5 Years

“Employment edged into a mild contraction in August, the first decline after more than two years of job growth. Meanwhile, input cost pressures continued to ease, and manufacturers responded by raising selling prices more modestly,” Bhandari said.

Softer demand affected hiring and purchasing decisions. Manufacturing employment declined for the first time in two-and-a-half years, although the fall was marginal.

Input buying increased for the 62nd consecutive month but recorded its weakest growth during this period. Firms either restocked selectively or reduced purchases in response to softer demand.

Finished goods inventories rose for the second consecutive month, with manufacturers citing lower-than-expected sales. Pre-production inventories also increased, although the pace of accumulation eased.

Cost Pressures Ease

Input cost inflation moderated to a six-month low despite higher prices for materials such as steel and increased transport costs.

With cost pressures easing, manufacturers largely limited price increases. Output charge inflation remained slight and was the weakest in 45 months. Fewer than 7 per cent of firms raised selling prices, with some companies opting to protect their order books.

Business Confidence Improves

Despite the slowdown, manufacturers’ expectations for the next 12 months improved. Around 16 per cent of firms surveyed forecast higher output, while the rest expected activity to remain unchanged.

Business confidence rose to its highest level since May, although it remained subdued compared with historical trends.

(KNN Bureau)