Factory output rises at quickest pace since Oct 2007

Manufacturers indicated that the ongoing relaxation of COVID-19 restrictions, better market conditions and improved demand helped them to secure new work in October.

India's manufacturing sector activity improved for the third straight month in October with companies raising output to the greatest extent in 13 years amid robust sales growth, a monthly survey said on Monday.

The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) rose from 56.8 in September to 58.9 in October, and pointed to the strongest improvement in the health of the sector in over a decade.

In April, the index had slipped into contraction mode, after remaining in the growth territory for 32 consecutive months. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

"Levels of new orders and output at Indian manufacturers continued to recover from the COVID-19 induced contractions seen earlier in the year, with the PMI results for October highlighting historically-sharp monthly rates of expansion," said Pollyanna De Lima, Economics Associate Director at IHS Markit.

Lima further noted that "companies were convinced that the resurgence in sales will be sustained in coming months, as indicated by a strong upturn in input buying amid restocking efforts".

Manufacturers indicated that the ongoing relaxation of COVID-19 restrictions, better market conditions and improved demand helped them to secure new work in October.

On the employment front, the compliance of government guidelines related to the COVID-19 pandemic caused a further reduction in employment. The fall was the seventh in consecutive months.

"There was disappointing news on the employment front though, with October seeing another reduction in payroll numbers.

“Survey participants that noted job shedding mentioned having observed containment measures to halt the spread of the coronavirus disease 2019," Lima said.

Inflationary pressures, meanwhile, remained subdued as seen by a modest increase in input costs and only marginal rise in selling prices.

Meanwhile, hopes of an end to COVID-19 cases and the reopening of other sectors in the economy underpinned positive sentiment towards the year-ahead outlook for production.

The level of confidence was at a 50-month high.

"Also, confidence towards the year-ahead outlook for production improved as firms hoped that fewer COVID-19 cases and the reopening of other businesses could boost output growth," Lima noted.

Photograph: Amit Dave/Reuters