India's manufacturing PMI eases to 54.7 in October, export orders hit 6-month high

India's manufacturing sector maintained strong growth in October even as the pace of expansion in output and new orders moderated and price pressures eased, according to a monthly survey released on Monday.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) stood at 54.7 in October, down from 55.1 in September.

However, it remained comfortably above the 50-point mark that separates expansion from contraction.

The latest reading was also above the survey's long-run average, indicating continued improvement in the health of the manufacturing sector.

The survey showed that new export orders grew at the fastest pace in six months as Indian manufacturers reported gains in Bangladesh, Canada, Indonesia, Nepal, Oman, Saudi Arabia, Sri Lanka, the UK, the US and the UAE.

Growth eased only marginally from September's seven-month high and remained strong by historical standards, the survey said.

Higher sales and new product launches supported a sharp increase in factory output, which remained above its long-run average. However, production growth moderated from the previous month, largely due to a slowdown among intermediate goods manufacturers.

"India's manufacturing PMI softened to 54.7 in October from 55.1 in the previous month, but remained firmly in expansionary territory and above its long-run average," said Pranjul Bhandari, Chief India Economist at HSBC.

Bhandari further said that "strong international demand pushed growth of new export orders to a six-month high, supporting a robust rise in output. Producers also increased input inventories to the greatest extent in eight months, building precautionary buffers to mitigate potential shortages and meet rising production requirements amid a volatile global environment."

Indian manufacturers also increased input inventories at the fastest pace in eight months in “deliberate efforts to accommodate buoyant demand and prevent shortages.”

Employment in the manufacturing sector increased for the second consecutive month even as the pace of job creation was modest and eased from September.

“Despite continued demand growth, business confidence slipped from September and remained below its long-run average,” the survey report said.

Nearly 18% of manufacturers expected output to increase over the coming year, while the remaining respondents were neutral about the outlook.

“Positive expectations were underpinned by new client enquiries and demand for industrial automation and technology solutions, qualitative data showed,” it added.