India's Manufacturing PMI At Eight-Month High, Surges To 56.4 In July

The July PMI data pointed to an improvement in overall operating conditions for the 13th straight month

New Delhi: India's manufacturing witnessed growth in July as the S&P Global India Manufacturing Purchasing Managers’ Index (PMI) climbed from 53.9 in June to 56.4 in July, reported news agency PTI. The index hit an eight-month high on the back of significant improvement in business orders, a monthly survey said on Monday.

Purchasing Managers’ Index or PMI is basically an economic indicator, which is derived after monthly surveys of different companies.

What prompted the growth in the manufacturing sector?

The seasonally adjusted index exhibited a marked improvement in the health of the manufacturing sector in eight months. The July PMI data pointed to an improvement in overall operating conditions for the 13th straight month. Going by the PMI parlance, a print above 50 denotes expansion while a score below 50 points at contraction.

The growth was achieved amid economic growth and the cooling of inflation in July. "The Indian manufacturing industry recorded a welcome combination of faster economic growth and softening inflation during July," noted Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

Goods producers witnessed a softer increase in their expenses as demand for raw materials remained high, thereby increasing cost burdens. However, the rate of inflation slipped to an 11-month low. Chemicals, electronic components, metals, textiles, and transportation fees were up in July, according to the report.

Lima further said "output expanded at the fastest pace since last November, which points to a positive indicator of new orders. Although the upturn in demand gained strength, there were clear signs that capacity pressures remained mild as backlogs rose only marginally and job creation remained subdued."

The aggregate new order intakes have pushed the growth substantially in July, recovering the growth momentum lost in June. "The latest increase was in fact the most pronounced since last November, with quicker expansions recorded in all three broad areas of the manufacturing industry," as per the survey.

Even as the manufacturing industry managed a solid performance, the overall job creation was muted. There was a marginal increase in employment, and it remained in the same lines as seen in the current five-month sequence of growth. Around 98 per cent of the firms didn't tinker with the staff strength.

"Another factor that constrained hiring activity was future uncertainty. Despite improving from June's 27-month low, the overall level of business sentiment was muted in the context of historical data. In fact, 96 percent of manufacturers forecast no change in output from present levels over the course of the coming 12 months," said S&P Global .