October PMI rises to 56.7; Input cost inflation eased, manufacturing strong

The HSBC Flash India Composite PMI Output Index rose to 56.7 in October from 55.9 in September, marking the fastest expansion in business activity since June.

However, The index remained below its average level for 2026 so far.

A reading above 50 indicates expansion, while a reading below 50 signals contraction.

Manufacturing activity expands, input cost inflation eases

Pranjul Bhandari, Chief India Economist at HSBC, said, “Private-sector manufacturing activity continued to expand, with growth of output and new orders broadly unchanged at last month’s levels. However, the steady pace of new order growth masks the fastest increase in new export orders since June 2025. Manufacturers responded by increasing their stocks of purchases and finished goods. Input cost inflation eased, while the rise in selling prices softened to its weakest in almost four years.”

Manufacturing and services activity improves

Both manufacturing and services recorded stronger growth in October. The HSBC Flash India Services PMI Business Activity Index increased to 56.2 from 55.2 in September, while the Manufacturing PMI Output Index edged up to 57.6 from 57.5.

The overall Manufacturing PMI, however, slipped to 54.9 in October from 55.1 in September, partly due to slower job creation in the sector.

Companies reported that improving market conditions and higher new orders supported business activity. New export orders also grew at their fastest pace in six months, with firms receiving orders from markets such as the US, the UK, the Middle East and Bangladesh.

Hiring slows despite stronger business activity

Despite stronger output and new orders, companies remained cautious about hiring in October. Employment increased only marginally, recording its slowest pace in the year-to-date.

Staffing levels in the services sector remained unchanged, ending a nine-month period of job creation. Manufacturing companies continued to add workers, but the pace of hiring slowed.

Businesses indicated that their existing workforce was sufficient to manage current workloads. This also helped reduce outstanding work for the third time in the past four months.

Backlogs of work declined at their fastest pace since August 2021, with the latest fall among the sharpest since the global financial crisis.

Input cost inflation eases for seventh consecutive month

Inflationary pressures eased further in October, with input cost inflation slowing for the seventh consecutive month to its lowest level in almost a year. Both manufacturing and services companies reported slower increases in input costs, although some firms cited higher steel and transportation expenses.

Companies also moderated their selling price increases. Output price inflation slowed to its weakest pace since March 2025, while manufacturing selling prices recorded their softest increase in almost four years.

The easing of input costs could provide some relief to businesses, particularly manufacturers facing pressure from raw material and transportation expenses.

Manufacturers increase inventories as export orders rise

Manufacturing companies increased their stocks of purchases and finished goods in October to prepare for higher demand.

Purchasing activity continued to expand, although it recorded its slowest growth since the current expansion began in July 2021. Despite this moderation, stocks of purchases rose at their fastest pace in eight months as supplier delivery times shortened.

Inventories of finished goods also increased as companies responded to stronger new orders. The pace of growth in finished goods stocks was the sharpest on record, according to the survey.

Business confidence improves

Indian companies remained optimistic about business activity over the next 12 months, supported by expectations of stronger market conditions. Business confidence improved to its highest level since May, although it remained below the average recorded during 2026 so far.

Optimism strengthened across both manufacturing and services, suggesting that businesses expect demand conditions to improve further in the coming year.