Factory activity rebounds in Oct after hitting 8-month low in September

New Delhi: India‘s manufacturing activity rebounded in October, marking a positive beginning for the third quarter of the current financial year, driven by new orders, international sales and production, according to a private survey released on Monday.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 57.5 in October from an eight-month low of 56.5 in September. It was 55.5 in October 2023.

A reading above 50 indicates expansion, while below that signifies contraction.

“India’s headline manufacturing PMI picked up substantially in October as the economy’s operating conditions continue to broadly improve. Rapidly expanding new orders and international sales reflect strong demand growth for India’s manufacturing sector,” said Pranjul Bhandari, chief India economist at HSBC.

The introduction of new products and effective marketing strategies contributed to improved sales performance, according to anecdotal evidence, the survey noted. “Companies noted a quicker increase in order book volumes that was stronger than the average seen in nearly 20 years of data collection.” New export orders recorded a robust increase after the weakest growth in a year-and-a-half during September, with new contracts coming in from Asia, Europe, Latin America and the US, as per the survey.

Production volumes were ramped up in October due to faster increases in the consumer and investment goods categories.Meanwhile, inflationary pressures also increased. While input price inflation reached a three-month high, it remained below the long-run trend. Rise in output prices outpaced the historical trend, according to the survey.

“Input and output prices are both increasing as a result of persistent inflationary pressures in materials, labour, and transportation costs,” said Bhandari.

Employment of new staff also rose, higher than in September. “Around one-in-ten panellists reported an increase in employment, while 1% shed jobs. This supported the first decline in backlogs in over a year,” the survey noted.

Input delivery times reduced for the eight consecutive month in October, only slightly, as most panellists reported no change in vendor performance.

Positive outlook remains among manufacturers.

Positive sentiment has been on the rise since September, exceeding the average seen over the past 13-and-a-half years.

“To start the third fiscal quarter, business confidence is also very high due to expectations of continued strong consumer demand, new product releases, and sales pending approval,” Bhandari added.