Output From Indian Factories Fell in October

Conditions in India’s manufacturing industry deteriorated for the third consecutive month in October, according to the HSBC Purchasing Managers’ Index. The index was 49.6, unchanged from September.


Manufacturers cut production as new orders continued to fall, indicating weaker demand. Backlogs of work rose amid evidence of power cuts.


“Manufacturing activity contracted for the third consecutive month in October," said Leif Eskesen, Chief Economist for India and ASEAN, HSBC. "Order flows remain weak, despite a bounce-back in export orders after two months of decline. Moreover, businesses continue to cut back purchases and a rise in inventories suggest that output will remain subdued.”


While domestic demand weakened, foreign orders grew for the first time since July. Anecdotal evidence suggested that the weaker rupee had boosted foreign demand.


However, manufacturers also said that the weaker rupee had led to higher prices for imported raw materials, with input cost inflation hitting a 16-month high. These cost burdens were partly passed on to consumers.


Employment in the sector rose after a slight decline in September.


The PMI is based on a survey of purchasing executives in Indian companies. An index figure above 50 signals expansion, while below 50 signals contraction.

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