India’s manufacturing activity declined to a three-month low in September, but cost pressures continued to recede, according to the S&P Global’s Purchasing Managers’ Index.
The S&P Global India Manufacturing PMI edged down to 55.1 from 56.2 in August, data released today showed.
A reading above 50 indicates expansion in activity, while a sub-50 print is a sign of contraction. This is the 15th consecutive 50-plus print for the manufacturing PMI.
“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, said.
New orders and production saw a substantial increase in September, with some leading indicators suggesting that output looks set to expand further at least in the short-term as firms seek to fulfil sales contracts and replenish stocks, De Lima added.
Asia’s third-largest economy is expected to be the world’s fastest growing this year but faces headwinds from global and domestic monetary tightening, financial market volatility as well as the persistent impact of Russia’s invasion of Ukraine.
India’s central bank last week slashed its fiscal year gross domestic product growth forecast to 7% from 7.2% earlier.
In September, purchasing costs rose at the slowest pace in just under two years, while output charge inflation receded to a seven-month low, S&P Global said.
Businesses benefited from a notable moderation in price pressures and companies sought to restrict selling price hikes and overall charge inflation eased to a seven-month low, it added.
“Once again we saw businesses become more confident in the outlook as inflation worries were tamed. The overall level of positive sentiment seen in September was the best in over seven-and-a-half years,” Pollyanna De Lima said. “That said, currency risks and the impact of a weaker rupee on inflation and interest rates could derail optimism during October.”
India’s key inflation rate, as measured by the Consumer Price Index, returned to 7% in August from July’s five-month low of 6.71%. The Reserve Bank of India is now just one month away from failure, with inflation having been outside the central bank’s 2-6% tolerance range for all of 2022.
The RBI is deemed to have failed if CPI inflation is outside the 2-6% range for three consecutive quarters. It averaged 6.3% in January-March, 7.3% in April-June, and will exceed 6% again in July-September.
The central bank has raised interest rates sharply since early May to curb inflation, in line with several central banks across the globe that are rolling back pandemic-era ultra-easy policies.
Sharp rate rises by the US Federal Reserve have pummeled developed and emerging market currencies over the past several weeks. The rupee also fallen to record lows.
