The manufacturing sector saw its weakest expansion in five years in August, with a private survey of 400 companies pegging the purchasing managers index at 52.8 in the month indicating a steep slowdown driven by softer demand and new orders.
Similarly, hiring in the private sector manufacturing also saw the first decline in two-and-a-half-years with companies citing lower business requirements, HSBC, which compiles the PMI data, said in a report Tuesday. On the other hand, input cost pressures eased in the month, with leading manufacturers raising prices modestly, resulting in a 45-month low for output price inflation. Despite current softer conditions, business confidence rebounded to a three-month high, with 16% of companies forecasting higher output over the next year.
The survey said the manufacturing sector growth slipped to 52.8 in August -- the lowest since 2021, down from 53.5 in July, as output and new orders moderated amid softer demand conditions, indicating the weakest improvement in the health of the sector for five years.
In the purchasing managers’ index parlance, a print above 50 means expansion, while a score below 50 denotes contraction.
Firms reported softer demand conditions, which subsequently led to weaker increases in buying levels and stocks, as well as a mild decline in employment.
"Final manufacturing PMI slipped to 52.8 in August, extending its decline for a third consecutive month. The output index fell to its lowest level since August 2021, signalling that production is still expanding but at a markedly slower pace," the report quoted Pranjul Bhandari, chief economist at HSBC India.
New orders continued to grow, though at their weakest pace in five years. Survey respondents linked the slower expansion to difficult market conditions and softer demand for certain products.
Meanwhile, exports continued to climb, driven by demand from key markets such as Australia, Germany, China, Spain, Thailand, and the US. However, the expansion rate for international orders moderated compared to July.
On the jobs front, manufacturing employment fell for the first time in two-and-a-half years, though the rate of decline was only fractional. Companies that reduced staffing levels mainly cited lower business requirements.
