Indian manufacturing growth accelerates in October: PMI

Photo for representational purposes. | Photo credit: B. Jothi Ramalingam

India’s private sector manufacturing activity rebounded in October, breaking a three-month streak of slowdowns after hitting an eight-month low in September, according to the survey-based HSBC India Manufacturing Purchasing Managers’ Index (PMI), which rose to 57.5 from 56.5 in the previous month.

A reading above 50 on the PMI indicates an expansion in activity. The roughly 400 factories surveyed for the index by S&P Global Market Intelligence reported an acceleration in production growth in October, with new orders and international sales driving the rebound.

Fresh export orders recovered in October after rising at their mildest pace in 18 months in September, with companies reporting new deals from customers in Asia, Europe, Latin America and the US. Production volumes rose, led by robust gains in consumer and capital goods categories, with companies citing demand resilience, positive sales pipelines and favorable market conditions as key factors.

However, inflationary pressures increased as input costs rose at a quarterly high pace, with companies attributing most of this pressure to freight, labor and material costs. In response, companies chose to increase their selling price at a robust pace that exceeded the trend.

Overall, companies have increased their workforces from September, with around 10% of companies surveyed reporting they are hiring more staff, while 1% of companies are cutting jobs. Companies also significantly scaled up pre-production inventories by accumulating input inventories at a pace that was one of the “most notable” in nearly two decades of data collection, S&P Global said.

Importantly, business confidence also improved from September, when it reached its lowest level since April 2023. Only about 23% of companies surveyed had expected production growth a year ahead, while the remaining companies had forecast no change.

In October, Indian manufacturers became more optimistic about future production volumes, S&P Global noted, with positive sentiment “above average” over a thirteen-and-a-half-year period.

“As we enter the third fiscal quarter, business confidence is also very high on expectations of continued strong consumer demand, new product launches and sales pending approval,” reasoned Pranjul Bhandari, chief India economist at HSBC, who forecast the recovery in linked the economy together. PMI leads to broad improvements in the operating conditions of the economy.

“Meanwhile, both input and output prices are rising due to persistent inflationary pressures in materials, labor and transportation costs,” she noted.