India factory growth slows in October, export orders jump, PMI shows

India's manufacturing growth slowed in October as domestic demand eased and hiring weakened, though a surge in export orders and the softest output price pressures in nearly four years helped cushion the slowdown, a private survey showed.

HSBC's India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, eased to 54.7 in October from 55.1 in September, below a preliminary estimate of 54.9. PMI readings above 50.0 indicate growth.

New orders - a key gauge of demand - pulled back marginally from September's seven-month high. Export orders stood out, accelerating to their fastest pace in six months.


Output lost some ground. Manufacturers filled their warehouses with finished products at a record pace in the survey's more than 21-year history, attributing it to buoyant demand and efforts to prevent shortages.

However, the aggressive stockpile build coincided with raw material purchasing growth slowing to its weakest in the entire 64-month sequence of expansion, suggesting firms may be hedging against a less certain demand outlook rather than gearing up for stronger sales ahead.

Factory employment grew for a second month but the pace slowed from September with capital goods makers cutting staff. Business confidence dipped marginally and, while broadly in line with levels seen over much of the past year, was below its long-run average.

"Producers also increased input inventories to the greatest extent in eight months, building precautionary buffers to mitigate potential shortages and meet rising production requirements amid a volatile global environment," said Pranjul Bhandari, HSBC's chief India economist.

Input cost inflation retreated to its lowest since February. Selling price rises fell to their weakest in nearly four years, suggesting limited pricing power.