Manufacturing PMI falls to 5-year low in August amid sales slowdown | Economy & Policy News

India’s private sector manufacturing activity expanded at its slowest pace in five years in August as weak demand slowed sales, output and hiring, a private survey showed on Tuesday.

 

HSBC’s India Manufacturing Purchasing Managers’ Index (PMI), which tracks monthly changes, fell to 52.8 in August from 53.5 in July. The reading was the lowest since August 2021 (when it was 52.3) and also below the index’s long-run average of 54.2.

 

The latest figure — a weighted average of new orders, output, employment, suppliers’ delivery times and stocks of purchases — was also below the Flash India Manufacturing PMI estimate of 52.9 released earlier in August.

  

The index remained above the 50-mark, indicating expansion in activity. A reading below 50 signals contraction. August also marked the 59th consecutive month of expansion.

 

“India’s final manufacturing PMI slipped to 52.8 in August, extending its decline for a third consecutive month. 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.

 

Demand softened across two of the three industrial groups tracked by the survey, with new business intake increasing at the slowest pace in five years. Survey panellists attributed the weak upturn to challenging market conditions and subdued appetite for some products.

 

Growth in international orders also slowed, while production volumes across private manufacturers eased to their weakest level in five years. “Firms linked the slowdown to softer demand conditions and more limited increases in new order volumes,” S&P Global said.

 

Manufacturing employment fell for the first time in two-and-a-half years with companies that reduced staffing levels mainly citing lower business requirements.

 

As demand weakened, some companies slowed their purchase of inputs while others expanded input buying at the weakest pace in over six years.

 

“Stocks of finished goods increased for the second month running, with companies linking the accumulation to lower-than-expected sales. The rise was moderate and softer than in July,” the survey said.

 

The rate of inflation for inputs fell to the lowest in six months even as manufacturers continued to face higher costs for materials, including steel, and transport. As a result, the rate of inflation for final prices was mild, receding to the lowest in 45 months.

 

“Employment edged into a mild contraction in August, the first decline after more than two years of job growth. Meanwhile, input cost pressures continued to ease, and manufacturers responded by raising selling prices more modestly,” Bhandari said.