India’s Manufacturing PMI Climbs to Seven-Month High of 55.1 in September

The seasonally adjusted HSBC India Manufacturing PMI rose from 52.8 in August to 55.1 in September, marking the strongest improvement in the sector’s operating conditions since February.

Despite the monthly improvement, the average PMI for the second quarter of the financial year stood at 53.8.

The rise in new orders was supported by firmer demand for electronic goods, food products, pharmaceuticals and textiles. Total sales also increased at their fastest pace since February, while export orders recorded stronger growth amid increased demand from markets including Brazil, Europe, the UAE and the US.

“India's factory sector ended the quarter on a firmer footing. The PMI rose to 55.1 in September, up from 52.8 as stronger domestic and overseas demand lifted sales and production,” Pranjul Bhandari, Chief India Economist at HSBC, said.

“Hiring resumed at its fastest pace since May, and manufacturers became more optimistic about the months ahead,” she added.

The improvement in demand was reflected in factory output, which expanded at its fastest rate in four months. Intermediate goods manufacturers recorded the strongest increases in new orders and output, while the capital goods segment registered more modest gains.

Employment conditions also improved during the month, with manufacturers resuming hiring. The pace of job creation was the strongest recorded since May.

Manufacturers increased their purchases of raw materials during September and also accumulated inventories. Stocks of purchases grew at their fastest rate in seven months and remained well above the long-term average.

Business sentiment strengthened as well, with optimism regarding future output rising to a four-month high.

At the same time, cost pressures increased. Manufacturers reported a faster rise in input prices during September, with higher costs for electronic components, pharmaceutical products and steel contributing to the increase.

The September PMI reading indicates that India’s manufacturing sector entered the final month of the quarter with improved demand conditions, stronger production and a renewed pace of hiring.