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

India's manufacturing sector experienced its slowest growth in five years in August, with demand remaining weak and job losses marking the first since over two years, according to a survey. The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, declined to 52.8 in August from 53.5 in July, slightly below the preliminary estimate of 52.9.

A PMI reading above 50.0 indicates growth in activity. Despite a 7.8% growth in the April-June quarter, driven by an investment boom and manufacturing sector expansion, the current quarter's growth is expected to slow to 6.6%, according to the poll. New orders increased at the slowest pace since August 2021, with firms attributing the challenges to market conditions and weak demand for certain products.

Export orders also grew, albeit with a deceleration in international demand growth from July. Although output continued to expand, it did so at its slowest pace in five years. Factory headcount fell for the first time in 30 months, although the decline was marginal. Cost pressures eased, with input price inflation reaching a six-month low.

However, firms limited price increases as a result, leading to a slowdown in output charge inflation to its weakest in 45 months, falling below its long-run trend. While business confidence improved slightly, reaching its highest since May, overall sentiment remained subdued and below historical standards.