India manufacturing growth slows in October as export orders rise

India’s manufacturing growth slowed in October as domestic demand eased and hiring weakened, although stronger export orders and softer price pressures helped support the sector, according to a private survey.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 54.7 in October from 55.1 in September. The reading was also below the preliminary estimate of 54.9. A PMI reading above 50 indicates expansion.

New orders, a key indicator of demand, edged down from September’s seven-month high. Export orders, however, increased at their fastest pace in six months.

Factory output also lost some momentum. Manufacturers increased their stocks of finished goods at the fastest rate in the survey’s more than 21-year history, citing strong demand and efforts to avoid shortages.

However, the record build-up in finished goods coincided with a slowdown in raw material purchasing. Growth in input purchases fell to its weakest level in the entire 64-month period of expansion. This suggests companies may be building precautionary stocks amid uncertainty over future demand rather than preparing for a further increase in sales.

Factory employment rose for a second consecutive month, but the pace of job creation slowed compared with September. Capital goods manufacturers reduced staff numbers.

Business confidence also dipped marginally. Although it remained broadly in line with levels recorded during much of the past year, it was below its long-term average.

“Producers also increased input inventories to the greatest extent in eight months, building precautionary buffers to mitigate potential shortages and meet rising production requirements amid a volatile global environment,” said Pranjul Bhandari, HSBC’s chief India economist.

Input cost inflation fell to its lowest level since February. Selling price increases also slowed to their weakest pace in nearly four years, indicating limited pricing power among manufacturers.