In August, manufacturing output, order books grew at fastest pace since November 2021

Indian manufacturers reported the fastest increase in production and new orders this August since November 2021, thanks to higher strengthening demand conditions and a spike in export orders, as per the survey-based S&P Global India Manufacturing Purchasing Managers’ Index (PMI). 

The seasonally adjusted S&P Global India Manufacturing PMI moderated slightly to 56.2 in August from 56.4 in July, signalling the second-strongest improvement in operating conditions for producers since last November. A reading of 50 on the PMI indicates no change in firms’ activity levels. 

Input cost inflation, a major worry for producers in recent months due to high global commodity prices, softened to the weakest rate in a year as prices of aluminium and steel cooled during August, but firms continued to pass on higher freight, labour and material prices to clients at a rate that was little-changed from July. 

While August marked the fourth successive monthly slowdown in the rate of input cost inflation, factory gate charges (output prices) rose at the second-weakest pace since April.   

With inflation concerns fading a bit, business sentiment strengthened further from June’s 27-month low, raising the degree of optimism among manufacturers to its highest in six years. “Predictions of stronger sales, new enquiries and marketing efforts all boosted confidence in August,” S&P Global said. 

“Firms welcomed the weaker increase in input costs with an upward revision to output forecasts amid renewed hopes that contained price pressures will help boost demand. Inflation concerns, which had dampened sentiment around mid-year, appear to have completely dissipated in August as seen by a jump in business confidence to a six-year high,” remarked Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.   

Lead times on inputs continued to shorten in August, with the latest improvement in vendor performance the greatest in close to five years, S&P Global said. However, manufacturers added to their input inventories at the slowest pace in a year, even as production backlogs piled up at the fastest rate since November 2020. 

On the whole, Ms. De Lima said that Indian manufacturers continued to benefit from the absence of COVID-19 restrictions that have facilitated a sustained improvement in demand conditions.