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India manufacturing output soars to 22-month high in October

01 November, 2016

India’s manufacturing sector growth jumped to a 22-month high in October thanks to a sharp rise in new business inflows and purchasing activity, a private survey showed on Tuesday.

The seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI) climbed to 54.4 in October from September’s 52.1, according to data compiled by Markit. 

In terms of sectors, consumer goods producers continued to lead growth in output and new orders, and also outperformed producers of intermediate and investment goods. 

Overall output increased for the 10th straight month in October thanks to strong growth in new orders, Markit said.

“October data provide positive news for India’s economy, as manufacturing output and new orders expanded at the fastest rates in 46 and 22 months respectively,” Pollyanna De Lima, economist at Markit and author of the report.

The Markit data comes a day after government numbers showed India’s infrastructure output rose to a three-month of 5% in September from 3.2% in August thanks to higher production of steel and refinery products.

De Lima also said that the sector looks to be building on the foundation of the implied pick-up in growth in the previous quarter and that the Reserve Bank of India’s interest-rate cut last month will support growth. The RBI has now lowered interest rates by 175 basis points since January 2015.

“The extended easing cycle, however, brought upside risks to inflation, with manufacturers seeing purchase costs rising at the quickest pace in over two years,” she said.

According to the survey findings, the average price of inputs rose markedly during October, with the rate of inflation quickening to the fastest since August 2014. Survey participants reported higher prices across a wide range of goods, but particularly highlighted steel, plastic and petrol, Markit said. 

This prompted firms to pass on to clients part of these higher cost burdens by raising prices. The rate of output price inflation was the fastest in six months, the survey showed. 

Companies sought to offset the effects of marked input cost inflation by purchasing and storing a greater level of pre-production items. Buying levels grew at the strongest rate in 14 months while stock levels increased at the fastest pace since July 2015, Markit said.

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India manufacturing output soars to 22-month high in October

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