Nikkei India Manufacturing PMI
Manufacturing sector growth in India gathered momentum in October as firms responded to stronger order inflows by scaling up production, input purchasing and employment. Price gauges continued to point to upward inflationary pressures, but were similar to September’s readings. Inventory trends varied, with companies utilising stocks of finished goods to satisfy greater demand whilst rebuilding their input holdings.
Rising from 52.2 in September to 53.1 in October, the Nikkei India Manufacturing Purchasing Managers’ Index® (PMI® ) highlighted the jointstrongest upturn in the health of the sector in 2018 so far. Moreover, the current growth spell was stretched to 15 months.
Ongoing improvements in demand, coupled with technological advancements and favourable market conditions, prompted a stronger upswing in production. The rate of output growth was the second-highest registered in the year-to-date, with accelerations evident in the consumer, intermediate and investment goods sectors
New orders increased solidly during October, which panel lists attributed to successful advertising efforts, strengthening underlying demand and competitive price setting. The rise was the fastest since June.
Whereas growth of total new orders gathered pace, the upturn in export sales cooled at the start of the fourth quarter. The expansion was the weakest in three months and below the long-run series average.
Manufacturers stepped up hiring in October, with job creation the strongest since last December. In turn, businesses were able to lower their outstanding business volumes for the second straight month.
October data showed a fifth successive monthly rise in quantities of purchases. The expansion was broadly similar to the moderate pace noted in September. Anecdotal evidence suggested that ongoing growth of new work underpinned the increase in buying levels. At the same time, vendor performance was broadly unchanged.
Amid reports of higher prices for chemicals, energy and metals, average cost burdens increased further. The rate of inflation was marked and broadly in line with its long-run average. Some manufacturers passed part of the additional cost burden on to their clients by hiking their charges. That said, the rate of selling price inflation was mild in the context of historical survey data and much weaker than seen for costs.
Trends for stocks differed, with a fall in holdings of finished goods contrasting with accumulation of input inventories. The former was associated with the immediate dispatch of products to clients, while the latter was linked to the purchasing of additional materials amid higher demand.
Indian manufacturers were confident that output will be higher over the course of the next year, with sentiment underpinned by planned R&D investments and marketing initiatives. That said, optimism was stymied by concerns towards future market conditions. The overall level of positivity was at a 20-month low.
Comment: Commenting on the Indian Manufacturing PMI survey data, Pollyanna De Lima, Principal Economist at IHS Markit and author of the report, said:
“Manufacturing continued to make up for ground lost in August, with a robust and accelerated rise in new orders boosting production growth in October. Consumer, intermediate and investment goods output all increased at stronger rates.
“A combination of domestic and foreign orders fuelled the upturn in overall activity, although export orders displayed the slowest expansion since July whilst total new work rose at the sharpest pace since mid-year.
“Purchasing activity expanded further, impacting on suppliers’ delivery capabilities. Competition for some scarce raw materials also rose, causing further increases in input prices and weaker stock accumulation.
“The trend for employment was particularly encouraging, with job creation at a ten-month high. Firms sought to increase their competitive edge, with marketing activity and investment in research and development, which meant business sentiment remained positive. However, goods producers see challenges and uncertainties ahead, which in turn translated into the weakest degree of optimism seen in 20 months.”