India manufacturing growth rebounds in September, PMI hits 7-month high

India's manufacturing activity expanded at its fastest pace in seven months in September as stronger domestic and overseas demand boosted new orders and output, a survey showed on Thursday.

The HSBC India Manufacturing Purchasing Managers' Index, compiled by S&P Global, rose to 55.1 in September from 52.8 in August.

In the Purchasing Managers' Index (PMI), a print above 50 means expansion, while a score below 50 denotes contraction.

New orders rise at fastest pace in seven months

The survey said firmer demand for electronic, food, pharmaceutical and textile products led to a sharper increase in new business during September.

The upturn in total sales was the fastest since February, while new export orders also expanded at a quicker pace. Surveyed manufacturers reported stronger demand from clients in Brazil, Europe, the UAE and the US.

The stronger demand translated into the sharpest expansion in factory output in four months.

"India's factory sector ended the quarter on a firmer footing," said Pranjul Bhandari, chief India economist at HSBC.

Intermediate goods emerged as the strongest-performing segment, recording the fastest growth in both new orders and output. Capital goods, however, saw only modest increases, with growth weaker than in August.

Factory hiring resumes

Employment growth resumed in September after declining in the previous month.

The pace of hiring was solid and the strongest since May, the survey said. Manufacturers also increased purchases of materials, with overall buying activity expanding at a faster pace than in August.

Stocks of purchases rose at the fastest pace in seven months and well above the long-run average, as companies prepared for higher production and sales.

Finished goods inventories also increased for the third consecutive month, recording their second-fastest rate of accumulation in nearly 11.5 years, behind July.

Manufacturers became more optimistic about the outlook, with overall business confidence rising to a four-month high.

"Hiring resumed at its fastest pace since May, and manufacturers became more optimistic about the months ahead," Bhandari said, adding that companies bought more materials and built up stocks in anticipation of higher sales.

Input costs, selling prices rise

Prices of electronic components, pharmaceutical items and steel pushed up manufacturers' overall input costs. The rate of input cost inflation accelerated from August but remained below its long-run average.

Selling prices also rose at a faster pace, although the increase remained modest and below the historical trend.

The average manufacturing PMI for the second fiscal quarter stood at 53.8, its lowest since the same period in 2021, despite the September rebound.

The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.