India’s PMI at 22-Month High

Growth in India’s manufacturing activity touched a 22-month high in October with a stronger rise in new orders as well as output, the widely tracked Nikkei India Manufacturing Purchasing Managers’ Index showed.

After falling to 52.1 in September, PMI rose to 54.4 in October. The 50 point mark separates expansion from contraction, PTI reported.

The latest reading was indicative of a robust improvement in manufacturing business conditions that was in line with the long-run series average, the survey said.

Once again, consumer goods producers outperformed their intermediate and investment goods counterparts, registering stronger rates of expansion for both output and new orders.

In October, output increased for the tenth straight month and at the quickest rate in nearly four years. In spite of this, businesses left employment unchanged, a trend that has continued for the last many months.

The amount of new work received by manufacturers grew markedly during October, with anecdotal evidence linking the latest rise to improved underlying demand. The rate of expansion was at a 22-month high.

Interestingly, although data indicated that foreign orders contributed to the upturn in total new work, the rate of growth in new business from abroad eased to a three-month low.

Outstanding business also rose again during the latest survey period. The overall rate of accumulation was solid and the quickest in almost three years, with survey members reporting capacity pressures of finished goods decreased again.

Amid reports of orders being fulfilled directly from stocks, holdings of finished goods decreased again. That said, the rate of inventory depletion was modest and little-changed since September.

The average price of inputs rose markedly during October, with the rate of inflation quickening to the fastest since August 2014. Survey participants reported higher prices across a wide range of goods, but particularly highlighted steel, plastic and petrol.

Firms passed on to clients part of these higher cost burdens by raising their prices charged. The rate of output price inflation was the fastest in six months, but modest in the context of historical data.

Companies also attempted to offset the effects of marked input cost inflation by purchasing and storing a greater level of pre-production items.

Buying levels grew at the strongest rate in 14 months, while stock levels increased at the fastest pace since July 2015.

“October data provide positive news for India’s economy, as manufacturing output and new orders expanded at the fastest rates in 46 and 22 months, respectively,” IHS Markit economist and author of the report Pollyanna De Lima, said in a release.

The latest reading in Indian manufacturing PMI data for October was indicative of a robust improvement in manufacturing business conditions that was in line with the long-run series average, it said.

 “The sector looks to be building on the foundation of the implied pick-up in growth in the previous quarter. Supporting this was the Reserve Bank of India’s monetary policy committee announcement of a further 25 basis point reduction in its policy rate to 6.25%,” De Lima said.