India's manufacturing PMI expanded at its slowest pace in five years in August, as weak demand slowed sales, output and hiring, a private survey showed on Tuesday. HSBC's India Manufacturing Purchasing Managers' Index (PMI), which tracks monthly changes, fell to 52.8 in August from 53.5 in July. The reading was the lowest since August 2021, when it stood at 52.3, and also below the index's long-run average of 54.2.

Key Highlights

• Manufacturing PMI fell to a 5-year low of 52.8 in August, down from 53.5 in July.
• Manufacturing employment contracted for the first time in two-and-a-half years amid lower business requirements.

The latest figure - a weighted average of new orders, output, employment, suppliers' delivery times and stocks of purchases — was also below the Flash India Manufacturing PMI estimate of 52.9 released earlier in August.

The index remained above the 50-mark, indicating continued expansion in activity, with a reading below 50 signalling contraction. August also marked the 59th consecutive month of expansion for the sector.

Third Consecutive Month of Decline: HSBC

Pranjul Bhandari, Chief India Economist at HSBC, said the final India's manufacturing PMI slipped to 52.8 in August, extending its decline for a third consecutive month. She noted that the output index fell to its lowest level since August 2021, signalling that production is still expanding, but at a markedly slower pace.

New Orders Grow at Slowest Pace in Five Years

Demand softened across two of the three industrial groups tracked by the survey, with new business intake increasing at the slowest pace in five years. Survey panellists attributed the weak upturn to challenging market conditions and subdued appetite among buyers.

Growth in international orders also slowed during the month, while production volumes across private manufacturers eased to their weakest level in five years. S&P Global said companies linked the slowdown to softer demand conditions and more limited increases in new order volumes.

Also Read: Indian Manufacturing PMI Dips to Lowest Level in 5 Yrs of 53.5 in July

Manufacturing Employment Contracts for First Time in Over Two Years

Manufacturing employment fell for the first time in two-and-a-half years, with companies that reduced staffing levels mainly citing lower business requirements.

The survey also noted that stocks of finished goods rose for the second consecutive month, with companies linking the accumulation to lower-than-expected sales. However, the rise was moderate and softer than in July.

Input Cost Inflation Eases to Six-Month Low

The rate of inflation for inputs fell to its lowest level in six months, even as manufacturers continued to face higher costs for materials, including steel, and transport. As a result, the rate of inflation for final prices remained mild, receding to its lowest level in 45 months.

Pranjul Bhandari noted that employment edged into a mild contraction in August, the first such fall after more than two years of continuous job growth. She added that input cost pressures continued to ease, prompting manufacturers to raise selling prices more modestly during the month.