India's manufacturing growth slows as factory prices hit 12-year high
What's the story
India's manufacturing sector witnessed a slowdown in growth last month, marking its slowest pace in four months. The decline comes as factory gate prices have skyrocketed at the fastest rate in nearly 12 years. The HSBC India Manufacturing Purchasing Managers's Index (PMI), compiled by S&P Global, dropped to 57.7 in September from August's stronger reading of 59.3.
Growth indicators
Manufacturing sector is facing challenges
The PMI is a key indicator of economic health, with readings above 50 indicating growth in activity on a monthly basis. The recent drop in India's manufacturing PMI suggests that the sector is facing challenges. These challenges include rising input costs and intense competitive pressures, which have led to a moderation in new orders and output expansion.
Export growth
New export orders pick up pace
Despite the slowdown, new export orders have picked up pace from last month. Pranjul Bhandari, HSBC's chief India economist, said this indicates that demand outside the US may be compensating for any decline in demand from the US due to tariffs. Meanwhile, business confidence has risen to a seven-month high. Firms attribute their optimism to tax relief from recent goods and services tax rate changes and expectations of favorable demand in the year-ahead outlook.