India's manufacturing sector growth hits 7-month high in Sep on strong demand

NEW DELHI: India's manufacturing sector activity growth touched a seven-month high in September, boosted by accelerating new orders and output that fuelled solid expansion in factory hiring, a monthly survey reported on Thursday.

Indian manufacturing activity regained its upward momentum in September, driven by strong domestic and export demand. Moreover, business optimism reached a four-month peak.

The seasonally-adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) rose by more than two index points in September, to 55.1 from 52.8 in August, signalling the strongest improvement in the health of the sector for seven months.

In the Purchasing Managers' Index (PMI), a print above 50 means expansion, while a score below 50 denotes contraction.

"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. Hiring resumed at its fastest pace since May, and manufacturers became more optimistic about the months ahead," Pranjul Bhandari, Chief India Economist at HSBC, said.

On the price front, there were quicker increases in both input costs and selling prices, but rates of inflation remained mild by historical standards.

Firms also procured more materials for use in production processes and to add to inventories. Overall buying levels expanded at a quicker pace than in August.

"Companies bought more materials and built up stocks to prepare for anticipated sales. Finished goods inventories recorded their second-largest increase in nearly 12 years, signalling a clear shift from leaner stock levels," Bhandari said.

Strong demand across electronics, food, pharma, and textiles pushed total sales growth to its highest level since February. Moreover, export orders also expanded at a quicker pace from clients in Brazil, Europe, the UAE and the US.

According to panellists, job growth resumed in September, following a blip in the previous month and the pace of expansion in employment was solid and the most pronounced since May.

Indian manufacturers upgraded their output forecasts in September, with the overall level of positive sentiment rising to a four-month high. This positive outlook was driven by a healthy pipeline of new inquiries and expectations of sustained strong demand.

Expecting stronger demand ahead, manufacturers actively built up inventory. "Holdings of finished products increased for the third month in a row and at the second-fastest pace in 11-and-a-half years (behind July)," the report said.

The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.