India’s Manufacturing Sector Slows Down in September 2024
The PMI for India’s manufacturing sector dipped to 56.5 in September 2024, down from 57.5 in August, according to the HSBC India Manufacturing Purchasing Managers’ Index. This marks the weakest performance since January 2024.
Several factors contributed to this slowdown, including fierce competition and a softer increase in new export orders. While demand trends remained positive, the pace of expansion was constrained, leading to a more modest upturn in sales. Export orders saw a marked deceleration, with the rate of growth hitting its lowest level in 18 months.
Domestically, factories continued to operate robustly, but production growth slowed in both the consumer and capital goods segments. Intermediate goods production remained steady, contributing to the overall rate of expansion falling to an eight-month low.
Cost pressures mounted in September, with higher prices for chemicals, packaging, plastics, and metals. Despite this, the rate of inflation was considered mild by historical standards. Pranjul Bhandari, Chief India Economist at HSBC, noted that the momentum in India’s manufacturing sector softened in September from the very strong growth in the summer months.
Input prices rose at a faster rate, while factory gate price inflation eased, intensifying the compression on manufacturers’ margins. Weaker profit growth might impact companies’ hiring demand, as the pace of employment growth slowed for a third month.
Despite rising purchasing costs and labor expenses, manufacturers managed to raise their selling prices in September, though the rate of inflation eased to a five-month low. Indian manufacturers continued to ramp up their purchasing activity, driven by new business growth and greater production requirements. However, the rate of expansion in input buying was the slowest in the year-to-date.
On the employment front, growth also slowed, with some firms reducing their use of part-time and temporary workers. However, companies with projects in the pipeline continued to hire, helping maintain net employment growth.
Another key development in September was the stabilization of outstanding business volumes, which had been accumulating for 11 straight months. This was attributed to slower new business growth and job creation, enabling companies to keep up with their workloads.
Inventory trends were mixed in September. Stocks of finished goods continued to decline, extending a seven-year trend, while holdings of raw materials increased sharply, supported by improved lead times. Business confidence took a hit, with only 23% of manufacturers forecasting output growth in the year ahead, leading to the lowest level of business optimism since April 2023.
Doubts Revealed
Manufacturing Sector -: This is the part of the economy that makes products in factories. For example, making cars, clothes, or toys.
HSBC Report -: HSBC is a big bank that gives information about how well different parts of the economy are doing. They made a report about India’s factories.
PMI -: PMI stands for Purchasing Managers’ Index. It’s a number that shows if factories are doing well or not. A number above 50 means they are doing well.
September 2024 -: This is a month and year in the future. It means the ninth month of the year 2024.
Fierce competition -: This means that many companies are trying very hard to sell their products, making it tough for each one to do well.
New export orders -: These are requests from other countries to buy products made in India. A softer increase means fewer new requests than before.
Rising costs -: This means that it is becoming more expensive for factories to make products, like paying more for materials or workers.
Selling prices -: This is the amount of money that factories charge people to buy their products. Even though costs went up, factories increased their prices.
Employment growth -: This means how many new jobs are being created. If it slows down, fewer new jobs are being made.
Business confidence -: This is how positive or hopeful business owners feel about the future. If it is low, they are worried about what will happen next.
