India’s factory growth at five-year low in August on weakening demand, PMI shows

BENGALURU, Sept 1 (Reuters) - India's manufacturing sector contracted at its slowest rate in five years in August, as demand remained sluggish and job losses marked the first in over two years, according to a survey. The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, slipped to 52.8 in August from 53.5 in July, slightly below a preliminary estimate of 52.9.

A PMI reading above 50.0 signifies expansion. India, Asia's third-largest economy, grew 7.8% year-on-year in the April-June quarter, surpassing a Reuters poll expectation of 7.1%, fueled by an investment boom and manufacturing growth. However, growth is projected to ease to 6.6% in the current quarter, per the poll. New orders surged at the lowest pace since August 2021, with businesses citing challenging market conditions and weak demand for certain products.

Export orders also expanded, albeit the pace of international demand growth decelerated from July. While output expanded, it did so at its slowest rate in five years. Furthermore, factory employment declined for the first time in 30 months, though the decline was minor. Cost pressures eased, with input price inflation hitting a six-month low, leading firms to limit price increases.

Consequently, output charge inflation slowed to its weakest level in 45 months, falling below its long-run trend. Despite the overall slowdown, business confidence marginally improved and reached its highest since May. However, sentiment remained subdued compared to historical levels.