India's manufacturing sector hits 5-year low in August
What's the story
India's manufacturing sector has hit a five-year low in August, according to the HSBC India Manufacturing Purchasing Managers' Index (PMI). The index fell to 52.8 from July's 53.5, indicating a slowdown in growth. This is mainly due to weak demand and lower new orders and output. The decline also led to job losses for the first time in over two years.
PMI importance
Manufacturing PMI and GDP growth
The HSBC India Manufacturing PMI is a key indicator of manufacturing activity, with a reading above 50 indicating growth.
Despite the decline in August, India's economy grew by 7.8% year-on-year in the April-June quarter, beating expectations of 7.1%. This was mainly due to an investment boom and growth in the manufacturing sector.
However, growth is expected to slow down to 6.6% in the current quarter, according to a Reuters poll.
Orders surge
New orders and output
New orders in August rose at the slowest pace since August 2021, owing to challenging market conditions and weak demand for certain goods.
However, export orders also grew but at a slower rate than July.
Output continued to expand but at its slowest pace in five years.
Employment and costs
Cost pressures ease
In a sign of caution, factory headcount fell for the first time in 30 months, albeit marginally.
However, cost pressures eased, with input price inflation falling to a six-month low.
Firms responded by limiting increases in their selling prices, resulting in output charge inflation slowing down to its weakest level in 45 months and falling below its long-run trend.