India manufacturing PMI falls to 5-year low in August as demand weakens
Indian manufacturing faced its lowest growth rate in five years during August, characterized by a slowdown in output and new orders amid diminished demand. This period also marked the first job contraction in over two years, although input procure...
By ET Bureau | Updated:
Reuters
India manufacturing activity hits 5-year low in August as new orders slow
New Delhi: Manufacturing activity in India slowed to its weakest pace in five years in August as growth in output and new orders moderated, reflecting softer demand conditions, showed a private survey released on Tuesday.
The HSBC Purchasing Managers Index (PMI), compiled by S&P Global, fell to 52.8 in August from 53.5 in July and 59.3 a year earlier. A reading above 50 indicates expansion while one below signals contraction. Production volumes continued to rise in August, but the pace of growth eased. Firms attributed the slowdown to muted demand and more limited increases in new order volumes.
"The output index fell to its lowest level since August 2021, signalling that production is still expanding but at a markedly slower pace," said Pranjul Bhandari, chief India economist at HSBC. Despite the comparatively weaker performance in August, business expectations improved. Around 16% of survey respondents expect output to rise in the coming 12 months while the rest anticipate little change from current levels. Confidence climbed to its highest level since May, though subdued by historical standards.
New business expanded at a marked pace last month, but the growth was the slowest in five years. Panellists cited challenging market conditions and tepid demand for some products. Demand weakened across two of the three industrial groups tracked by the survey, with consumer goods remaining an exception. Export sales also accelerated in August though moderating from July. Manufacturers reported gains in markets such as Australia, Germany, mainland China, Spain, Thailand and the US. The softer sales environment weighed on employment. "Employment edged into a mild contraction in August, the first decline after more than two years of job growth," said Bhandari.
Companies that trimmed headcounts mainly cited reduced business requirements. Input buying continued to expand, marking the 62nd consecutive month of growth, but the pace was the weakest in that period. Some firms increased purchases to rebuild inventories while others reduced in response to softer demand. Stocks of finished goods rose for the second consecutive month, with firms attributing the accumulation to weaker-than-expected sales.
