India’s manufacturing PMI falls to 52.8 in August, weakest growth in five years

India's manufacturing sector expanded at its slowest pace in five years in August, as softer demand weighed on output, new orders and hiring activity, according to the HSBC India Manufacturing Purchasing Managers' Index (PMI) survey released on September 1.

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In August the seasonally adjusted manufacturing PMI dropped to 52.8 from 53.5 in July, which means it had declined for three months in a row. This most recent figure was also less than the survey's long-term average of 54.2. When the PMI is above 50 this shows that the situation is expanding, whereas a reading below 50 indicates contraction.

New Orders And Output Lose Momentum

Manufacturers continued to report growth in business activity, but the pace of expansion weakened significantly during the month.

According to the survey, new business increased at the slowest rate in five years as companies faced challenging market conditions and subdued demand for some products. Demand weakened across two of the three industrial groups tracked by the survey, with consumer goods remaining the only exception.

Production volumes also rose at a slower pace. Output growth eased to its weakest level since August 2021 as manufacturers linked lower production increases to softer demand and a moderation in new orders.

Export Orders Continue To Grow

Overseas demand remained supportive, although export growth also moderated from the previous month.

Manufacturers reported higher orders from international markets including Australia, Germany, mainland China, Spain, Thailand and the United States. However, the rate of growth in export orders slowed compared with July.

Hiring Falls For First Time In Over Two Years

The weaker demand environment affected employment and purchasing activity across the sector.

Manufacturing employment contracted for the first time in two-and-a-half years, although the decline was described as marginal. Companies that reduced headcount cited lower business requirements, according to the survey.

Purchase inputs went up for the 62nd month in a row, but the rate of buying was the lowest ever recorded over that span. Although some firms kept on restocking their inventories, others cut back on their purchases because of weaker demand.

Stocks of finished goods rose for the second straight month as sales growth fell short of expectations, resulting in inventory accumulation.

Cost Pressures Ease

Manufacturers reported a further easing in input cost pressures during August.

While businesses continued to face higher prices for inputs such as steel and transportation, overall input cost inflation slowed to a six-month low. As a result, companies raised selling prices at a more modest pace. Fewer than 7% of survey respondents increased prices during the month, while output price inflation fell to its lowest level in 45 months.

Outlook Remains Positive

Despite the slowdown in current activity, manufacturers remained optimistic about the year ahead. Around 16% of firms surveyed expect output to increase over the next 12 months, while the remaining respondents anticipate no change. Business confidence improved to its highest level since May, although it remained below historical averages.

The August survey indicates that India's manufacturing sector remains in expansion mode, but growth has moderated significantly amid weaker demand, slower order inflows and the first decline in employment since early 2024.