October biz activity accelerates, driven by strong manufacturing demand

India's growth activity picked up pace, though slightly, in October after softening in September, primarily due to the regaining of momentum by the manufacturing industry, according to the latest HSBC Flash India PMI.

The HSBC Flash India Composite PMI output index stood at 58.6 in October after the September reading of 58.3, which was a 10-month low. The headline index has been above the 50-mark for 39 consecutive months, the longest streak since June 2013. It is a single-figure snapshot of factory business conditions calculated from measures of new orders, output, employment, supplier delivery times and stocks of purchases.

While the services PMI business activity index surged to 57.9, up from September's 57.7, the manufacturing PMI output index grew significantly to 60.1 from 59.8 in the previous month. HSBC's flash India manufacturing PMI stood at 57.4 in October, up from its September reading of 56.5. The acceleration in growth was supported by quicker increases in factory production and service activity, according to the PMI survey compiled by S&P Global.

"India's flash manufacturing PMI indicated that the manufacturing industry regained growth momentum in October. Several components accelerated after a modest slowdown over the past two to three months," says Pranjul Bhandari, chief India economist at HSBC.

She says new orders and new export orders expanded at faster rates, providing a good omen for industrial production for the remaining months of 2024. "Manufacturers’ profit margins are still under pressure as input price inflation continued to pick up pace. Manufacturers are trying to pass on higher costs to downstream consumers by raising output prices.”

The survey finds that the Indian businesses indicated a sharp increase in new order intakes during October 2024. The expansion, mostly linked to positive demand trends, was also stronger than in September. In output, manufacturing led an upturn in sales despite rates of growth quickening in both segments.

According to the survey, a part of the upturn in total new orders was fuelled by an improvement in international demand for Indian goods and services. Rates of expansion in export sales accelerated at manufacturing firms and their services counterparts.

The hiring activity was more pronounced in the service economy, reveals the HSBC survey. "The latest increase in employment was sharp and the quickest in 18-and-a-half years," it says.

Despite that jobs still rose at a "marked pace" in the manufacturing industry, supporting the best upturn in payroll numbers at the composite level since February 2006. "Anecdotal evidence indicated that part- and full-time workers had been taken on, with both permanent and temporary contracts offered."

The manufacturing-only data shows that ongoing restocking efforts fuelled the growth of input purchasing during October. This led to pre-production inventories rising substantially. However, the fulfilment of sales from warehouses triggered another slight fall in stocks of finished goods, says HSBC.