Manufacturing PMI edges up to 55.3 in October, cost pressures contained

India's manufacturing sector activity gained some momentum in October, while price pressures remained contained.

According to the S&P Global's Purchasing Managers' Index, India's manufacturing PMI rose to 55.3 from 55.1 in September, data released on November 1 showed.

A reading above 50 indicates expansion in activity, while a sub-50 print is a sign of contraction. This is the 16th consecutive 50-plus print for the manufacturing PMI.

“The Indian manufacturing industry again showed signs of resilience in October, with factory orders and production rising strongly despite losing growth momentum,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said. "Manufacturers continued to loosen the purse strings as they expect demand buoyancy to be sustained in coming months.”

The rise in the headline PMI number largely reflected stronger increases in employment and stocks of purchases, S&P said.

Factory orders increased at an above-trend pace but were still the weakest since June. Production expanded at a slower rate in October, the slowest since June, it added.

Consumer goods were the brightest area of manufacturing in October, with firms signaling a rise in output, overall sales and exports.

Asia’s third-largest economy is expected to be the world’s fastest-growing this year but faces headwinds from global and domestic monetary tightening, financial market volatility as well as the fallout of the Russia- Ukraine war.

The Reserve Bank of India has slashed its fiscal year gross domestic product growth forecast to 7 percent from 7.2 percent and is holding an out-of-turn meeting on November 3 to deliberate on a report it needs to send to the government on its failure to meet its inflation mandate.

Consumer Price Index (CPI) inflation rose to 7.41 percent in September, confirming that average inflation had stayed outside the 2-6 percent band for three consecutive quarters.

As per the law, RBI must submit a report to the government explaining why it failed to contain inflation, the remedial actions it proposes to take, and the period within which inflation will return to target.

Also read: What RBI will explain to government on failure to manage inflation

Price pressures contained

Prices largely remained unchanged in October after receding over the last few months.

“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 said.

Holdings of finished products fell in October while pre-production stocks increased markedly.

There were also signs of substantial capacity pressures at goods producers, as outstanding business volumes rose to the greatest extent in almost two years.

Manufacturing employment increased at a marked rate that was one of the strongest since data collection started in March 2005, S&P said.

Looking ahead, Indian manufacturers remained confident of a rise in production volumes by October 2023, it added.