India’s manufacturing PMI rises to a 3-month high in August

• New orders and output increased at the quickest rates in nearly three years during August, said S&P.
• Export orders increased for the 17th month running halfway through Q2, and was also the greatest extent since November 2022.
• Price signals were mixed with a quicker increase in input costs contrasting with a softer uptick in factory gate charges.
  

The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) rose to 58.6 in August after hitting a three-month high in July at 57.7. This is the second-best improvement in the health of the sector for nearly three years, said a release by S&P.

New orders and output increased at the quickest rates in nearly three years during August. Output rose for the twenty-sixth successive month, and to the greatest extent in just under three years.

“Firms geared up to handle rising demand by scaling up buying levels and rebuilding their input stocks at the second-strongest pace in 18-and-a-half years of data collection. On the price front, cost inflationary pressures accelerated but there was a slower uptick in selling charges,” S&P said in a release.

While demand strength was key to August's performance, competitive pricing and advertising were also cited as factors behind sales growth.

“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,” S&P said. The panel members said that they secured new work from Bangladesh, China, Malaysia, Singapore, Taiwan and the US.

"The PMI results for India painted a vibrant picture of the nation's manufacturing landscape in August. 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 De Lima, economics associate director at S&P Global Market Intelligence.

‘Softer uptick in factory gate charges’

Manufacturers purchased additional raw materials and semi-finished items in August, and buying levels rose sharply, and at one of the fastest rates seen in over 12 years.

Price signals were mixed in August, with a quicker increase in input costs contrasting with a softer uptick in factory gate charges — which rose at the slowest pace in four months, whereas cost inflation picked up to its strongest in a year.

Cotton, foodstuff, rubber, steel and machinery spare parts all got costlier. "The presence of stronger cost inflationary pressures serves as a reminder of the challenges inherent in managing growth. Firms addressed rising input prices by lifting selling charges. However, the need to maintain competitiveness helped restrict charge inflation," said De Lima.

While Indian manufacturers did hire permanent and temporary staff on both part and full-time basis, as new orders flowed in, overall employment rose at the slowest pace in four months.

“Although historically elevated, the overall level of positive sentiment slipped to a three-month low due to inflation concerns,” S&P said.