India's Manufacturing Growth Slows in October as Domestic Demand and Hiring Lose Momentum

India's manufacturing sector recorded slower growth in October as domestic demand weakened and employment gains moderated. However, a sharp rise in export orders and the slowest increase in factory selling prices in nearly four years provided some support to the sector, according to a private business survey.

• The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, slipped to 54.7 in October from 55.1 in September. The reading was also below the preliminary estimate of 54.9. A PMI figure above 50 indicates expansion, while a reading below that level signals contraction.

• New orders, an important indicator of demand, edged down slightly after reaching a seven-month high in September. Export demand, however, showed stronger momentum, with new export orders rising at their fastest pace in six months.

• Factory output also moderated during the month. Manufacturers increased their stocks of finished goods at the fastest rate in the survey's history of more than 21 years. Companies linked the inventory build-up to strong demand and efforts to avoid potential supply shortages.

• At the same time, growth in raw material purchases slowed to its weakest level in the 64-month period of expansion. This suggests that some manufacturers may be building safeguards against an uncertain demand outlook rather than preparing for a significant rise in future sales.

• Factory employment increased for the second consecutive month, although hiring growth slowed compared with September. Capital goods manufacturers reduced their workforce. Business confidence also dipped slightly and remained below its long-term average, despite staying broadly in line with levels recorded over much of the past year.

• "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.

• Inflation in input costs eased to its lowest level since February. Manufacturers also raised selling prices at the slowest pace in nearly four years, pointing to limited pricing power amid changing market conditions.