India's Manufacturing PMI Eases In July, Dips To 57.7; Expansion Pace Remains Healthy

The index signalled a further substantial improvement in the health of the sector. Business conditions have now strengthened in each of the past 25 months

Manufacturing sector activity in India continued to expand in July compared to June, however, the S&P Global Purchasing Managers' Index (PMI) eased marginally to 57.7, according to data released on August 1 said. The manufacturing PMI stood at 57.8 in June. The survey revealed that the growth in manufacturing activity eased in July for a second month, with some moderation in output and new orders, although the pace of expansion remained healthy.

The index signalled a further substantial improvement in the health of the sector. Business conditions have now strengthened in each of the past 25 months. The gauge of manufacturing sector activity in July is above the key level of 50, which separates expansion in activity from contraction, for the 25th month in a row.

Andrew Harker, economics director at S&P Global Market Intelligence, said, "The Indian manufacturing sector showed little sign of losing growth momentum in July as production lines continued to motor on the back of strong new order growth.”

"All in all, the Indian manufacturing sector has maintained its position as one of the star performers globally, bucking the trend of demand weakness seen in other parts of the world," he added.

In July, S&P Global's survey reported "widespread" improvement in demand, which resulted in "another marked expansion" in new manufacturing orders. Further, export orders rose the most since November, especially from the US, Bangladesh, and Nepal. On the whole, the rise in new orders led to the manufacturing sector's output increasing substantially in July, although the rate at which it rose was the least in three months. Higher orders pushed up employment, with S&P Global describing the pace of job creation in July as "solid" and "broadly in line" with what was seen in May and June.

Rates of expansion in output and new orders were only marginally softer than in June, with firms expanding their employment and purchasing activity accordingly, the survey said.

According to the survey, reports of demand improvements were widespread and resulted in another marked expansion of new orders in the sector. Growth in new export business picked up to the fastest since last November.

On the inflation front, cost inflationary pressures remained relatively muted. The rate of input cost inflation accelerated to a nine-month high in July. Panellists reported higher costs for raw materials, in particular cotton. These higher prices for raw materials, plus rising labour costs, led firms to increase their selling prices, the survey said, adding that the rate of inflation was solid, but eased to a three-month low.

Firms generally expect demand to remain elevated over the coming year, supporting projections for growth of production. "Confidence was slightly lower than that seen in June, but remained above the series average. Around 32 per cent of respondents predicted a rise in output, with just 2 per cent pessimistic," the survey said.