HSBC Manufacturing PMI slows to 52.4 in August; but growth remains solid

NEW DELHI: The HSBC India Manufacturing PMI for the month of August slowed to 52.4 as against a July's 17-month high of 53.0. According to HSBC Purchasing Managers' Index, "The latest PMI data highlighted a tenth consecutive monthly improvement in operating conditions in August, as solid output growth was supported by strong expansions in total new orders and business from abroad."

Purchasing activity continued to rise, although a second consecutive decline in employment was recorded. Meanwhile, input cost pressures eased slightly following the acceleration seen in July, the survey said. "Among the monitored sub-sectors, the best performing was consumer goods, while business conditions deteriorated in the capital goods category," the survey added.

According to the survey, output at manufacturing companies rose for a tenth straight month in August, and at the second-sharpest rate since February 2013. "Output was reduced in the investment goods sub-sector, in contrast to growth recorded elsewhere," the survey noted.

The rate of growth slowed from July's 17-month peak but remained solid. New work intakes rose in each of the monitored subsectors apart from investment goods. "Similarly, new export orders rose in August, extending the current sequence of growth to 11 months. Surveyed firms pointed to strengthening demand from key export clients as the main reason behind expansions in foreign business," the survey elaborated.

Meanwhile, the survey also said that higher prices paid for raw materials meant that input costs rose strongly in August. That said, the rate of cost inflation slowed from July. Factory gate prices also increased during the month, although the pace of charge inflation at manufacturers was slight overall. Price rises were broad-based by sector, with the sharpest increase recorded in the consumer goods category.

Commenting on the India Manufacturing PMI survey, Frederic Neumann, Co-Head of Asian Economic Research at HSBC said, "Manufacturing activity moderated following a spurt in the previous month. Output and new orders slowed slightly in August, but remained robust relative to their 12-month history. The mood remains positive too, with firms accumulating inventory in response to stronger demand. However, price pressures remained elevated, despite the slight deceleration seen in input prices. This is likely to keep the central bank guarded against inflation risks, particularly from the pick-up in demand."