India’s manufacturing activity failed to hold the 58 mark in September, as the S&P Global Purchasing Managers’ Index (PMI) came in at 57.5 as against 58.6 in August.
Goods producers in India noted a mild slowdown in growth during September. However, a sharp rise in new orders underpinned sustained expansions in output, input purchasing and employment, S&P Global PMI Index showed.
According to the latest PMI report, new orders, the largest sub-component, grew at a slightly slower pace in September. Nonetheless, the increase still remains sharp and historically strong. The survey participants cited favourable demand trends, positive market dynamics, and fruitful advertising as reasons for the expansion in sales.
The report also adds that companies reported a sharp decrease in the growth of new export orders from the nine-month high in August, although it still remains significant. Recent data indicates a reduction in the surge of costs that Indian goods producers faced. The inflation rate, which had reached a one-year high in August, has now decreased to its lowest point in over three years. Panellists have indicated that they are paying more for copper, electronic components, foodstuff, iron, and steel, but they also noted lower costs for aluminium and oil.
Pollyanna 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.
Although the lowest for five months, the latest reading remained firmly above the no-change mark of 50.0 and its long-run average (53.9),
therefore signalling a sharp rate of expansion, S&P Global mentioned in the press release.
This comes just days after India's fiscal deficit reached 36% of the full-year target by August-end 2023-24, standing at Rs 6.42 lakh crore, according to data from the Controller General of Accounts (CGA). The fiscal deficit at this point in the current financial year is higher than the previous year, standing at 32.6% of the Budget Estimates (BE) for 2022-23 during the same period. The Union Budget aimed to reduce the fiscal deficit to 5.9% of the gross domestic product (GDP) for 2023-24, compared to 6.4% in 2022-23.
Moreover, last week, August Eight Core Industries' growth numbers came in at 12.1% Vs. 8% (MoM) indicating the growth in the core sector at At 14-month high.
Based on the statistics, it appears that Indian manufacturers and their suppliers did not face significant pressure, as the average delivery times did not increase noticeably. This was observed after six months of improved vendor performance. Furthermore, backlogs at goods producers reduced to a small extent overall.
For the August PMI, the gauge of manufacturing activity in August was above 50, the key level which separates expansion in activity from contraction, for the 26th month straight. A reading below 50 would mean a contraction in activity.
Andrew Harker, Economics Director at S&P Global Market Intelligence had said, "The Indian manufacturing sector showed little sign of losing growth momentum in July as production lines continued to motor on the back of strong new order growth. However, he added that pressure continued to come on capacity, prompting firms to expand employment solidly again, a trend that is likely to continue in the months ahead should demand remain strong.
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