The India Manufacturing PMI fell to 52.8 in August from 53.5 in July, marking its weakest improvement in five years, according to the latest HSBC India Manufacturing PMI survey compiled by S&P Global. The index remained above the 50 mark, indicating that manufacturing activity continued to expand, but growth lost momentum for a third consecutive month.
Output and new orders slow
The slowdown was led by weaker growth in output and new orders. Both indicators rose at their slowest rates since August 2021, with survey respondents citing challenging market conditions and softer demand for some products. Consumer goods were the exception among the three industrial groups covered by the survey.
Export orders continued to increase, with gains reported from Australia, Germany, mainland China, Spain, Thailand and the US. However, the pace of growth in international orders also eased from July.
The weaker sales environment affected hiring and purchasing decisions. Manufacturing employment declined for the first time in two-and-a-half years, although the fall was only fractional. Firms that reduced staffing mainly pointed to lower business requirements.
Input buying continued to expand for a 62nd consecutive month, but at its weakest pace during that period. Finished goods inventories increased for a second straight month as companies linked the build-up to lower-than-expected sales. Pre-production inventories also rose, although stock building slowed to its weakest pace since April.
Cost pressures ease
Cost pressures moderated during the month. Manufacturers still faced higher expenses for materials, including steel, as well as transport costs, but overall input price inflation eased to its weakest level in six months.
Lower cost pressures allowed companies to limit increases in selling prices. Output charge inflation was slight, recording its weakest rate in 45 months and remaining below its long-run trend.
Despite the weaker operating performance, business expectations improved. Around 16% of survey participants expected output to be higher over the next 12 months, while the rest anticipated no change from current levels. Confidence reached its highest level since May, although it remained subdued by historical standards.
Pranjul Bhandari, Chief India Economist at HSBC, said the final PMI slipped to 52.8 in August, with output reaching its lowest level since August 2021 and employment moving into a mild contraction after more than two years of job growth.
Source: S&P Global PMI
