Business confidence retreated, but firms scaled up buying levels to safeguard against input shortages.

The latest upturn in pre-production inventories was one of the strongest seen in 19-and-a-half years of data collection. A factor that supported the rise in purchasing activity was a moderation in cost pressures.

The rate of input price inflation softened to the slowest in five months. Concurrently, demand resilience meant that firms were comfortably able to share additional cost burdens with their clients by lifting selling prices.

The seasonally-adjusted HSBC India manufacturing PMI stood at 57.5 in August, below July's reading of 58.1 but above its long-run average of 54, signalling a substantial improvement in operating conditions, a S&P Global release said.

New business rose sharply midway through the second fiscal quarter, but the pace of expansion eased to a seven-month low. The increase is attributed to advertising, brand recognition and healthy demand trends.

Competitive conditions reportedly dampened growth. New export orders likewise increased at the weakest pace since the start of 2024. Yet, one in ten firms noted an improvement in global sales, which they associated with stronger demand from Asia, Africa, Europe and the United States.

Although output continued to rise at a historically sharp pace, the rate of expansion moderated to the slowest since January. A few companies suggested that fierce competition and shifts in consumer preferences affected output at their units.

Goods producers benefited from a moderation in cost pressures during August. Purchasing prices still rose, but did so to the weakest degree in five months.

With input cost inflation receding, goods producers sought to rebuild safety stocks by purchasing additional raw materials and semi-finished goods. The rate of input buying growth was sharp and the strongest since April.

Not only did input inventories increase further in August, but also to one of the greatest extents seen in 19-and-a-half years of data collection. Data showed that a lack of pressure on supplier capacity facilitated manufacturers' stock-rebuilding efforts.

Input lead times shortened for the sixth straight month in August. Goods producers also indicated that backlogs of work were broadly unchanged since July.

Job creation softened midway through the second fiscal quarter as a few firms trimmed headcounts. Nevertheless, the overall rate of employment growth was solid in the context of historical data.

Despite the slowdown in cost pressures, there was a marked increase in prices charged for Indian goods in August.

Firms reportedly shared additional cost burdens with their clients amid demand resilience.

Fibre2Fashion News Desk (DS)