India factory growth eases in October as manufacturing PMI slips to 54.7 from 55.1

India's manufacturing sector lost some pace in October. According to a new survey, factory output grew more slowly than before and new orders were slightly fewer. The relief was that cost pressure eased, which averted a sharper slowdown.

The survey was released on Monday, November 3. The HSBC India Manufacturing PMI stood at 55.1 in September and came down to 54.7 in October. A PMI reading above 50 means business is expanding, and below 50 means it is contracting. A reading of 54.7 therefore means growth continues, only at a slightly slower pace. The figure is also above its average.

Demand remains healthy and new business is rising. September had recorded the strongest growth in seven months. October was slightly lower, but by past records growth is still strong. Factories are running, people are at work and stocks of goods are being built up.

HSBC Chief Economist Pranjul Bhandari said: "The PMI eased slightly from 55.1 to 54.7 in October, but it is still in the expansion zone and above average. With strong demand from abroad, new export orders grew the most in six months, which supported production. Companies are building up raw material stocks as a precaution against shortages ahead, and stocks were raised the most in eight months."

Companies said they had gained from several countries, including Bangladesh, Canada, Indonesia, Nepal, Oman, Saudi Arabia, Sri Lanka, the UK, the US and the UAE. Export business is thus doing well at present.

On jobs, a rising workload led factories to add jobs for the second month in a row, but the pace of hiring slowed. There is little confidence about what lies ahead. Business confidence fell in September and dropped below its average. Only 18% of manufacturers expect output to rise next year; the rest are neutral and unwilling to say anything.

On costs, pressure appears to be easing across all three main segments of India's manufacturing sector. Although prices of some raw materials and electricity have risen, overall raw material costs rose at their slowest pace since February.

Bhandari said: "Prices of some items have gone up, yet overall cost pressure has eased slightly from last month." The PMI report has been prepared by S&P Global. Its data is gathered by surveying about 400 manufacturers.