Factory activity slows to 3-month low in September
The index reading underlines the resilience of India’s manufacturing sector activity amidst global recession fears, although has undergone a moderation for the second consecutive month in September. This number was 56.4 and 56.2 in July and August .
A key measure of manufacturing activity, the Purchasing Managers’ Index (PMI) for manufacturing for the month of September came in at 55.1, the 15th consecutive month that it is higher than 50, signifying an expansion in economic activity, even as business confidence rose to a seven-and-half-year high.
The index reading underlines the resilience of India’s manufacturing sector activity amidst global recession fears, although has undergone a moderation for the second consecutive month in September. This number was 56.4 and 56.2 in July and August .
“The latest set of PMI data show us that the Indian manufacturing industry remains in good shape, despite considerable global headwinds and recession fears elsewhere”, Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, the agency which conducts the survey, said in a statement.
The agency added that the September business confidence numbers for India were the best in over seven and a half years, it underlined the fact that “currency risks and the impact of a weaker rupee on inflation and interest rates could derail optimism during October”.
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Another important data point in the latest PMI numbers is the fact that inflation pressures seem to be easing in the economy. “Purchasing costs rose at the slowest pace in just under two years, while output charge inflation receded to a seven-month low”, the S&P release said. HT reported last month that inflation data indicated that this was beginning to happen.
“Overall business sentiment continues to improve and now stands at the highest level in seven and half years, as firms remain optimistic in their growth prospects. However, weakening global growth outlook and tighter domestic and global financial conditions are likely to remain the key downside risks to growth in the coming months”, Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays said in a note.
The dynamism seen in the latest PMI numbers is in line with the Monetary Policy Committee’s (MPC) upward revision to its growth forecasts for the current fiscal year from the second quarter onwards. The latest MPC resolution which was released on September 30th has projected quarterly GDP growth rates of 6.3%, 4.6% and 4.6% for the quarters ending September , December and March 2023 which is higher than the 6.2%, 4.1% and 4% projections made in the August MPC resolution. The PMI numbers are considered to be a more appropriate tracker of the formal sector manufacturing firms.
