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India's output growth at 9-month high in Aug; biz confidence improves

02 Sep '22
3 min read
Pic: Shutterstock
Pic: Shutterstock

A sustained improvement in demand conditions boosted new order intakes at Indian manufacturers during August, which in turn pushed output growth to a nine-month high. Production volumes were also supported by a pick-up in exports and upbeat projections for the year-ahead outlook. Firms were at their most optimistic for six years, according to a report by S&P.

Indian manufacturers reported the fastest increase in production in nine months, which they attributed to greater sales, recent efforts to enhance capacities, fewer COVID-19 restrictions and product diversification. Similarly, factory orders rose at the quickest pace since last November, reportedly boosted by strengthening demand conditions, new client wins and fruitful advertising. International markets gave impetus to total sales, as seen by a marked and quicker increase in new export orders halfway through the second fiscal quarter.

On the supply side, the results showed a further shortening of delivery times and a slower upturn in prices charged by vendors. The rate of input cost inflation softened to the weakest in a year, but the passing of higher freight, labour and material prices to clients kept the pace of increase in output prices little-changed from July.

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) was little-changed from July's reading of 56.4, posting 56.2 in August and signalling the second-strongest improvement in operating conditions since last November.

Contributions to the PMI from sub-indices varied as faster increases in new orders and output compared with slower expansions in employment and stocks of purchases. Delivery times, which is inverted before entering the calculation, shortened to the greatest extent in close to five years, the report said.

The latest results also indicated that recent inflation concerns somewhat faded, as business sentiment strengthened further from June's 27-month low. In fact, the degree of optimism was at its highest in six years. Predictions of stronger sales, new enquiries and marketing efforts all boosted confidence in August.

Although manufacturers continued to signal higher prices for a wide range of materials in August, the overall rate of cost inflation softened to a one-year low as commodity prices moderated. There was a moderate upturn in factory gate charges in August as monitored companies lifted their fees in line with the passing on of higher freight, labour and material costs to clients.

Strong sales growth and a rise in production requirements supported a further increase in input buying at manufacturers. Despite easing from July, the pace of expansion remained sharp. Firms also noted that lead times on inputs continued to shorten in August, with the latest improvement in vendor performance mild but the greatest in close to five years, the report added.

In turn, firms were able to add to their input inventories. Stocks of purchases increased markedly, but at the slowest pace in a year. Firms indicated that, in some instances, sales were fulfilled from current inventory holdings in August. This led to another decline in post-production stocks. Concurrently, there was another increase in backlogs at manufacturers, with the rate of accumulation the quickest since November 2020.

Fibre2Fashion News Desk (KD)

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