India Manufacturing PMI Eases to 54.7 in October as Export Orders Strengthen

India’s manufacturing sector continued to expand in October, but the pace of growth eased as domestic orders and hiring lost momentum. The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 54.7 from 55.1 in September and came in below the preliminary estimate of 54.9, according to a Reuters report published on November 2.

The reading remained above 50, the threshold separating expansion from contraction. It therefore indicates that factory activity continued to grow, but at a slower pace than in September. The survey also showed that stronger overseas demand helped offset softer domestic conditions, with new export orders rising at their fastest pace in six months.

The October PMI eased by 0.4 points from September. New orders, a key indicator of demand, pulled back slightly from the previous month’s seven-month high. Output also lost some momentum, although the overall survey remained consistent with continued expansion.

The headline figure should not be read as a direct measure of industrial production or gross domestic product. The PMI is a survey-based indicator that tracks the direction and breadth of changes reported by purchasing managers. A reading above 50 signals that more firms reported improving conditions than deteriorating conditions.

Manufacturers increased finished-goods inventories at the fastest pace in the survey’s more than 21-year history. Companies cited strong demand and efforts to avoid shortages. At the same time, growth in raw-material purchasing slowed to its weakest point in the 64-month sequence of expansion, suggesting that some firms may be building buffers cautiously rather than preparing for a sharp increase in production.

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Export demand was the strongest part of the October survey. New export orders increased at their fastest pace in six months, providing support as domestic demand eased. The contrast points to an uneven manufacturing picture: overseas business strengthened, while the broader pace of new orders at home softened from September’s level.

That divergence matters for manufacturers with a large domestic customer base and for firms that depend on overseas markets. Export growth can help sustain production when local orders weaken, but it also leaves companies exposed to changes in global demand, trade conditions, shipping costs and currency movements.

The survey does not establish that every manufacturing industry or company experienced the same trend. It records the responses of participating firms and is best read alongside official industrial production, trade and corporate data.

Factory employment increased for a second consecutive month, but the pace of hiring slowed compared with September. Capital-goods producers reduced staff, according to the survey. Business confidence also dipped marginally and remained below its long-run average.

Price indicators offered a more favourable signal for buyers. Input-cost inflation eased to its lowest level since February, while increases in selling prices slowed to their weakest pace in nearly four years. The moderation suggests that manufacturers had less pressure to raise prices, although it does not mean that input costs or factory-gate prices were falling across the sector.

HSBC’s chief India economist Pranjul Bhandari said producers had increased input inventories to the greatest extent in eight months, building precautionary buffers against possible shortages and a volatile global environment, Reuters reported.

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The latest survey points to continued industrial expansion, but it also highlights a gap between domestic and overseas demand. Stronger export orders are a source of support; slower hiring, weaker purchasing growth and softer business confidence are reasons to watch whether that support is sufficient to maintain the recent pace.

The inventory figures also need careful interpretation. A build-up of finished goods can reflect confidence that orders will be fulfilled, but it can also be a precaution against supply interruptions. The slower growth in raw-material purchases means the survey alone does not show that companies are preparing for a broad acceleration in production.

Policymakers and investors will look for confirmation in the next releases on industrial production, merchandise exports, employment and corporate earnings. If domestic orders and hiring remain subdued while export demand holds up, manufacturing growth could continue but remain uneven across industries.

For now, the October PMI provides a measured signal: India’s factory sector was still expanding, export orders strengthened, and price pressures eased, but domestic demand and employment momentum softened. One monthly survey is not enough to establish a lasting trend.

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Sources: Reuters. The HSBC India Manufacturing PMI is compiled by S&P Global.