India's manufacturing PMI lowest in 5 months

India's September manufacturing Purchasing Managers' Index (PMI) hit the lowest in five months as goods producers noted a mild slowdown in growth primarily due to a softer increase in new orders, according to S&P Global.

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) fell to 57.5 in September from 58.6 in August. Although the lowest for five months, the latest reading remained firmly above the 50 mark and its long-run average (53.9), signalling a sharp rate of expansion.

New orders, the largest sub-component of the PMI, rose at a softer pace in September.

"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," says Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

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, the PMI release says.

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.

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.

"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," says Lima.

The positive outlook for production and demand strength fed through to another round of job creation in the manufacturing industry. Employment growth picked up since August and was strong by historical standards.

Average selling prices charged by Indian manufacturers rose at a solid and faster rate that outpaced its long-run average. "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," cautions Lima.

Manufacturers' purchasing of inputs continued to grow at a robust rate that was aligned with those seen for new orders and production. This contributed to another increase in pre-production inventories. Holdings of finished goods meanwhile fell further as companies reportedly fulfilled some orders directly from warehoused items.

On Monday, Zoho Corporation CEO Sridhar Vembu said the software services firm saw a pronounced slowdown in growth in September across countries and across products. "Given the geographically and product-wise diversified nature of our revenue streams, I suspect the global economy is taking a turn for the worse," he wrote on microblogging platform X.