India's manufacturing sector continues to strengthen in July

Manufacturing sector conditions in India continued to strengthen in July, with the HSBC PMI climbing to a 16-month high due to faster increases in new orders, output and stocks of purchases.

Firms bought extra inputs to broadly the same extent as in June, however, whilst job creation receded to the weakest since November 2024.

Meanwhile, business confidence retreated to its lowest level in three years. Cost pressures intensified, though remained negligible by historical standards, while the latest increase in selling prices was stronger than the long-run series average.

Rising from 58.4 in June to 59.1 in July, the seasonally adjusted HSBC India Manufacturing Purchasing Managers Index (PMI) signalled the strongest improvement in the health of the sector since March 2024.

Supporting the uptick in the headline figure was a sharp and accelerated expansion in new orders placed with Indian goods producers. Subsequently, production growth strengthened to a 15-month high in July and outpaced the series trend.

Although rising international demand from across the globe reportedly contributed to the overall upturn in total sales, new export orders increased to a lesser extent than in June.

Indian manufacturers remained confident of a rise in output over the course of the coming 12 months, but the overall level of positive sentiment fell to its lowest mark in three years.

Charge inflation quickened only fractionally from June, but the rate of increase was above that seen for input costs and its own trend. On the purchasing side, goods producers sought to replenish their inventories by acquiring additional inputs.

Elsewhere, a further improvement in vendor performance supported another increase in stocks of purchases. The latter expanded to the greatest extent in 15 months.

Inventories of finished goods decreased further in July, with companies continuing to suggest that sales had been met from warehoused products.

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