India's manufacturing sector activity falls to 5-month low in Sep on softer increase in new orders: PMI

New Delhi: Manufacturing activities in India fell to a five-month low in September as new orders rose at a softer pace, which tempered production growth, a monthly survey said on Tuesday.

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) fell to 57.5 in September, down from 58.6 in August -- the lowest in five months.

The September PMI data pointed to an improvement in overall operating conditions for the 27th straight month. In PMI parlance, a print above 50 means expansion while a score below 50 indicates contraction.

"India's manufacturing industry showed mild signs of a slowdown in September, primarily due to a softer increase in new orders which tempered production growth.

"Nevertheless, both demand and output saw significant upticks, and firms also noted gains in new business from clients across Asia, Europe, North America and the Middle East," said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

On the inflation front, supply-chain conditions were broadly stable, which helped drag down the rate of input price inflation to its weakest in over three years, the survey said.

However, greater labour costs, upbeat business confidence and buoyant demand facilitated a sharper increase in output charges.

"... while robust demand was supportive of production growth, it added to price pressures in September. The solid increase in output charges signalled by the PMI data, which occurred in spite of a notable retreat in cost pressures, could restrict sales in the coming months," Lima said.

Meanwhile, the RBI Governor-headed six-member Monetary Policy Committee (MPC) is scheduled to meet for three days beginning October 4. Governor Skhatikanta Das will announce the decision on Friday (October 6).

According to experts, the Reserve Bank of India may retain the benchmark rate at 6.5 per cent at the forthcoming bi-monthly monetary policy review.

On the jobs front, the positive outlook for production and demand strength led to another round of job creation in the manufacturing industry.

Going ahead, Indian manufacturers were confident that output volumes would increase over the course of the coming 12 months, with the overall level of positive sentiment improving to its highest in 2023 so far on the back of buoyant customer appetite, advertising, and expanded capacities.

"Manufacturers held a strongly positive outlook for production, as they expect demand to strengthen over the course of the coming 12 months. Upbeat forecasts continued to drive job creation efforts and initiatives to replenish input stocks," Lima said.

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