Manufacturing activity rises to the second fastest pace in three years in August

A rise in new orders and output pushed manufacturing activity to the second-strongest pace in three years.

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) rose to 58.6 in August compared with 57.2 in July, according to data released Friday.

"Robust and accelerated increases in new orders and production suggest that the sector looks set to provide a strong contribution to second quarter (fiscal) economic growth,” said Pollyanna De Lima, Economics Associate Director, S&P Global Market Intelligence.


"The PMI results for India painted a vibrant picture of the nation's manufacturing landscape in August," De Lima further added.

India’s economic growth strengthened to a four-quarter high of 7.8% in the first quarter, data released earlier this week showed, as the services sector pushed activity. The growth in manufacturing was less pronounced at 4.7% in Q1FY24, compared with 6.1% in the similar quarter last year.

Demand strength pushed the new orders to the fastest pace since January 2021, helped by better export performance.

"Not only did new export orders increase for the seventeenth month running halfway through the second fiscal quarter, but also to the greatest extent since November 2022," the release stated, noting that members reported new work from Bangladesh, China, Malaysia, Singapore, Taiwan and the US.

Buying levels rose to the fastest level in nearly 12 years, even as input costs rose faster.

The increase in charge inflation, or selling prices, was not as fast as input prices as they tried to retain competitiveness. The companies reported an increase in cotton, foodstuff, rubber, steel and machinery spare parts, as per the release.

"The presence of stronger cost inflationary pressures serves as a reminder of the challenges inherent in managing growth," De Lima stated.

Inflation also had a bearing on year-ahead outlook.

"Although historically elevated, the overall level of positive sentiment slipped to a three-month low due to inflation concerns," the release stated.

Continuing the trend of weaker employment generation, the employment numbers rose at the slowest pace in four months.