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Business News/ Industry / Manufacturing/  Mint Explainer: Why factory production is at a three-month high

India’s manufacturing purchasing managers index (PMI) rose to a three-month high of 58.6 in August following an increase in orders and output, a survey by S&P Global showed. Mint explains the reasons.

What factors caused the manufacturing PMI to hit a three-month high in August?

A robust improvement in sectoral conditions across India as well as new orders helped boost manufacturing during August. According to the survey, firms geared up to handle rising demand by scaling up buying levels and rebuilding their input stocks at the second-fastest pace in 18-and-a-half years of data collection.

How did the manufacturing PMI in August compare with those of the previous three months?

According to S&P Global, India’s PMI for manufacturing stood at 58.6 in August, 57.7 in July, 57.8 in June and 58.7 in May. A PMI of over 50 signifies expansion and below 50 signifies contraction.

What did S&P say about the factors behind the three-month high?

"The PMI results for India painted a vibrant picture of the nation's manufacturing landscape in August. Robust and accelerated increases in new orders and production suggest that the sector looks set to provide a strong contribution to second quarter (fiscal) economic growth," Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said in the survey.

"Companies' strategic focus towards a global orientation were evident via a sharp and quicker expansion in international sales. Export-centric tactics should help ensure that production remains on an upward path in the coming months," she added.

What is the outlook for manufacturing production in the year ahead?

The S&P survey said that a quicker increase in input costs contrasted with a softer uptick in factory gate charges during August, with the latter rising at its slowest pace in four months. Cost inflation rose to its highest level in a year, forcing companies to pay more for cotton, foodstuffs, rubber, steel and spare parts for machines. Hence, bigger marketing budgets, better customer relations, stronger demand and a healthy number of client enquiries underpin upbeat production forecasts among manufacturers for the year ahead.

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Updated: 04 Sep 2023, 05:57 PM IST
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