Source: Republic World
India’s manufacturing sector demonstrated impressive growth in October 2024, rebounding from a brief slowdown in September. This resurgence is captured by the Purchasing Managers’ Index (PMI) compiled by S&P Global and analyzed by HSBC. The PMI rose to 57.4 in October from 56.5 in September, signaling enhanced expansion in the manufacturing space. Notably, any PMI value above 50 indicates growth in economic activity, making the current figures promising.
The composite PMI, which aggregates both manufacturing and services output, stood at 58.6 in October. This marked a slight improvement from September’s 58.3, which had been a 10-month low. Importantly, this figure indicated that October was the 39th consecutive month of expansion for the Indian private sector, a streak not observed since 2013. The steady growth underscores the resilience of the economy amid varied global challenges.
Key Drivers of Growth
One of the central factors behind this resurgence was the increase in new orders. The PMI report indicated that businesses experienced a sharp uptick in new order intakes, which can be attributed to positive domestic demand trends. This expansion was not only stronger than the growth recorded in September but also supported by a noticeable increase in export orders. The growth in exports highlighted an improved international appetite for Indian goods, further boosting manufacturing output.
Pranjul Bhandari, Chief India Economist at HSBC, emphasized that after a modest dip over the past few months, several components of the sector showed significant acceleration. The quicker upturn in new work intakes motivated manufacturers to scale up their operations and expand business activity. This proactive approach to fulfilling higher demand reflected optimism among manufacturers for continued growth through the end of 2024.
Employment and Inventory Management
Employment levels, a critical aspect of economic health, also saw positive developments in October. While the most pronounced hiring activity was observed in the services sector, which marked its highest employment increase in 18-and-a-half years, the manufacturing sector also showed notable job creation. Companies expanded their workforce, engaging both part- and full-time employees with permanent and temporary contracts. This rise in employment contributed to the most substantial upturn in payroll numbers since February 2006.
Another notable aspect of the manufacturing sector’s recovery was the increase in input purchases. Companies actively engaged in restocking efforts, resulting in a significant rise in pre-production inventories. However, as firms ramped up production to meet demand, stocks of finished goods saw a marginal decline as sales were fulfilled directly from warehouse supplies.
Challenges and Cost Pressures
Despite the strong growth signals, the sector continues to grapple with rising input costs. Input price inflation persisted in October, exerting pressure on manufacturers’ profit margins. To mitigate the impact of these costs, many firms resorted to increasing their output prices, passing on some of the expenses to consumers. This trend indicates that while growth has picked up, manufacturers must carefully manage pricing strategies to maintain competitiveness.
Moreover, while the increase in demand and sales brought positive results, it was also accompanied by intensified price pressures. This highlights the balancing act between maintaining production efficiency and managing the cost of raw materials and logistics.
Outlook for the Remaining Year
The solid performance in October positions India’s manufacturing sector for a promising close to 2024. Analysts view the robust demand trends and expansion in international sales as encouraging signs for future growth. As new orders and employment numbers continue to rise, the sector is poised for sustained momentum. The ability of manufacturers to navigate cost pressures while meeting rising consumer expectations will be crucial in shaping the trajectory of industrial production.
In conclusion, the October PMI report paints a picture of resilience and recovery within India’s manufacturing sector. Buoyed by a strong rise in new orders and international demand, coupled with significant employment growth, the sector is moving in a positive direction. However, challenges such as input cost inflation and managing output prices will require strategic attention to ensure continued progress.
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