India's factory growth cooled to eight-month low in September, PMI shows

Factory production growth has been weakening since June and is likely to have further affected the expansion rate in Asia's third-largest economy last quarter, after the rise in gross domestic product (GDP) softened to 6.7 per cent in April-June.

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New Delhi: India’s manufacturing sector growth declined to an eight-month low in September, dragged by a slower pace of expansion in international orders and sales, an industry survey conducted by S&P Global showed on Tuesday.

Purchasing Managers’ Index (PMI) for manufacturing declined to 56.5 in September from 57.5 recorded in August. This was the third straight month of slowdown in factory production.

“With manufacturing growth softening throughout the second fiscal quarter, the average PMI reading slipped to its lowest since the three months to December 2023,” S&P Global said in its monthly survey report. A PMI print above 50 indicates growth in the sector while below 50 shows contraction.

Growth in international orders slumped to the lowest level in 18 months. “Momentum in India’s manufacturing sector softened in September from the very strong growth in the summer months,” said Pranjul Bhandari, Chief India Economist at HSBC.

“Output and new orders grew at a slower pace, and the deceleration in export demand growth was especially evident as the new export orders PMI was the lowest since March 2023,” she added.

On the price front, there were moderate increases in input costs and selling charges. The cost pressure was led by increased chemical, packaging, plastic and metal prices. The rate of inflation in the sector was similar to that seen for input costs.

Hiring growth also receded in September, reflecting a reduction in the number of part-time and temporary workers at some firms. Those that recruited extra staff cited projects in the pipeline.

“Weaker profit growth might have an impact on companies’ hiring demand, as the pace of employment growth slowed for a third month,” Bhandari said.

Business confidence fell to the lowest level since April 2023. Only around 23% of the manufacturers that participated in the survey forecast output growth in the year ahead, while the remaining firms predict no change. The monthly manufacturing PMI report is based on a survey conducted among around 400 manufacturers spread across the country.