Growth in India's manufacturing sector quickened in October, driven by faster rises in total new orders and foreign sales, which also produced more jobs during the month, HSBC data revealed on Monday.
The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index compiled by S&P Global rose from September's eight-month low of 56.5 to 57.5 in October, meaning strong and accelerated improvement in operating conditions.
Demand for Indian goods increased, which helped in the rise in performance. Firms witnessed an order book volume build-up that came quicker and stronger than average seen over almost 20 years of data collection, the report added. The new products launched and marketing initiatives successful, according to anecdotal evidence, contributed to sales performance improvement, the report stated.
New orders for exports accelerated faster as well, following a record weakest gain in more than a year in September. Panel members said new orders gained more sharply in Asia, Europe, Latin America, and the US. Production volumes rose more quickly in October as the rate of acceleration picked up in both consumer and investment goods categories.
Panellists reported that firms cited price pressures as coming mainly from freight, labour and materials. Manufacturers not only added more staff in the early stages of the third fiscal quarter but to a greater extent than in September. About one-in-ten reported employment had increased and 1% lost jobs.
While commenting upon the latest upturn in output, companies spoke of the buoyancy of demand, pipelines of sales, and more favorable market conditions. While October data signaled stronger inflationary pressures across India's manufacturing sector, they added that this was still from a low base.
An associated increase in production needs increased raw material demand, with suppliers comfortably able to deliver inputs in a timely manner. Goods producers were also more eager to employ additional staff which, allied to growing material costs, added to business costs," the report says.
Input price inflation accelerated to a three-month high, although it was still below its long-run trend. Output prices grew at a pace that was stronger than the series trend.
The latest survey also indicated further increases in the quantities of purchases for manufacturers were reported by suppliers who felt comfortable enough to accept them. Continuing improvements in demand, as well as expectations for further growth over the next year, contributed to the growth of buying levels. Meanwhile, input lead times decreased for the eighth consecutive month in October, but by only a modest amount as most panelists indicated no improvement in vendor performance. A greater desire to hold safety stocks, consistent with shorter lead times, was manifested in another large advance in preproduction inventories.
It was one of the most marked build months in nearly two decades of data, with the inventories of finished goods maintaining a different pattern from the inputs side, as the companies resorted to inventories to meet sales requirements. According to the HSBC report, Indian producers became more optimistic about the future output volumes.
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