India’s manufacturing PMI slows to 52.1 in September

India’s manufacturing sector lost momentum in September, as growth of new orders eased from 20-month high of August, however it was above the crucial 50.0 threshold for the ninth consecutive month. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) - a composite single-figure indicator of manufacturing performance - was down to 52.1 in September from 52.6 in August. The PMI figures also showed an intensification of inflationary pressures, both input costs and output charges increased at quicker rates.

As per the report, improved client demand supported the upswing in order books and growth was reportedly hampered by strong competition for new work. Foreign new orders for Indian-manufactured goods expanded markedly in September, at the quickest rate in 14 months. While companies scaled up their buying levels and hired additional workers, the pace has flagged compared to previous months. Amid reports of orders being fulfilled directly from stocks, post-production inventories fell again in September. On the other hand, holdings of raw materials and semi-manufactured goods rose for the tenth successive month.

Further, average purchase costs increased at a faster pace in September, but was weak compared to its long-run trend. The main item reported to be up in price was steel. Manufacturers attempted to protect profit margins as output charges were raised further. Despite ticking higher, the rate of inflation was historically muted. However, output is still rising at a decent clip and the sector looks likely to have delivered a stronger contribution to Gross domestic product (GDP) growth in Q2 FY2016/17.