Factory Activity Expands at a Modest Pace in October: PMI

Bangalore: Indian factory activity expanded at a modest pace in October, as stronger demand led manufacturers to add jobs for the first time in four months and allowed them to raise prices, a business survey showed on Monday.

The HSBC Manufacturing Purchasing Managers' Index (PMI), compiled by Markit, rose to 51.6 in October from 51.0 in September. The index has now been above the 50 level that indicates an expansion in activity for a year.

"Manufacturing activity picked up modestly amid stronger output and new order flows, particularly from overseas clients," said Frederic Neumann, co-head of Asian economic research at HSBC.

The new orders sub-index rose to 53.0 from September's 51.3 on robust overseas demand that helped push output higher. That prompted manufacturers to add jobs for the first time since June.

The improvement in activity allowed companies to increase prices charged slightly, even as the cost of raw materials rose at their slowest pace in 17 months.

The increase in output prices will likely nudge overall inflation higher and may prompt the Reserve Bank of India to keep monetary policy restrictive in the near term.

"This trend (rising output prices) could strengthen with growth, which is why the RBI will remain cautious about relaxing its grip at this juncture," Neumann said.

Copyright: Thomson Reuters 2014