India Manufacturing PMI Falls to 52.8 in August Amid Softer Demand

India’s manufacturing sector continued to expand in August at 52.8, although firms reported softer demand conditions, which subsequently led to weaker increases in buying levels and stocks, according to HSBC India Manufacturing PMI data on Tuesday. Meanwhile, hikes to selling charges were confined to fewer than 7 per cent of panellists, as cost pressures faded and several companies sought to protect order books, according to the seasonally adjusted data – a gauge of overall conditions derived from measures of new orders, output, employment, supplier delivery times and stocks of purchases.

Pranjul Bhandari, Chief India Economist at HSBC, said that India’s final manufacturing PMI slipped to 52.8 in August, extending its decline for a third consecutive month. Input cost pressures continued to ease, and manufacturers responded by raising selling prices more modestly, Bhandari added. Despite the softer performance, business expectations strengthened. Around 16 per cent of survey participants forecast higher output over the coming 12 months, while the remainder expect no change from present levels.

Confidence rose to its highest mark since May, but remained subdued by historical standards. Demand trends softened across two of the three industrial groups tracked by the survey, with consumer goods the exception. Overall, new business increased at a marked rate but one that was the slowest for five years. Panellists attributed the weaker upturn to challenging market conditions and subdued appetite for some products. “Export sales also rose further, with gains reported from markets including Australia, Germany, mainland China, Spain, Thailand and the US. That said, growth of international orders eased from July,” the PMI data showed. Moreover, production volumes at Indian manufacturers continued to rise strongly in August.

“Inventory data offered further evidence of caution among manufacturers. 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 data said.

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