Softer increase in new orders, output slows down manufacturing PMI in July

However, international sales expanded at the fastest pace in over 13 years, while job creation remained robust, and selling prices saw the steepest increase since October 2013

Growth in Indian manufacturing softened in July due to "slightly" softer increases in new orders and output, according to a private agency's survey on Thursday.

The HSBC final India Manufacturing Purchasing Managers' Index (PMI) , compiled by S&P Global, came in at 58.1 last month, little changed from June's 58.3 reading. The index has been above the 50-mark separating growth from contraction since July 2021.

International sales by Indian manufacturing expanded at the fastest pace in more than 13 years, while job creation remained robust and selling price saw the steepest increase since October 2013.

“Buoyant demand conditions created a ripple effect across the manufacturing industry, mainly through a substantial upturn in new work intakes. Despite slowing since June, the pace of sales growth was sharp in the context of historical data,” according to the survey.

 

"India's headline manufacturing PMI showed a marginal slowdown in the pace of expansion in July, but with most components remaining at robust levels, the small drop is no cause for concern," said Pranjul Bhandari, chief India economist at HSBC.

“New export orders remain a bright spot, rising by 1 point to the second-highest level since early 2011. The continuous increase in the output price index, driven by input and labour cost pressure, may signal further inflationary pressure in the economy,” she said.

The survey noted that production volumes increased substantially at the start of the second quarter of FY24, even as the growth rate eased from June. Manufacturing PMI was nearly six points above the average seen since the survey began in March 2005.

“With demand conditions remaining favourable and new orders coming in, goods producers purchased additional inputs in July. The rate of expansion was sharp as more than a quarter of panelists lifted buying levels. In turn, strong input demand drove cost inflation higher. Manufacturers reported having paid more for coal, leather, packaging, paper, rubber and steel,” it said.

It said that companies continued to hire in July, with anecdotal evidence showing offers for permanent and short-term contracts.

“The latest increase in employment was softer than in June, though one of the strongest in the survey's history. Yet, while 7 per cent of panellists noted job creation, 92 per cent reported no change in headcounts,” the survey noted.

The July manufacturing PMI was below the flash estimate of 58.5 for the month but output grew for the 37th straight month since July 2021.

                                                                       
                                                                                  

January 2023	55.4
February	55.3
March	56.4
April	57.2
May	58.7
June	57.8
July	57.7
August	58.6
September	57.5
October	55.5
November	56
December	54.9
January 2024	56.5
Februray	56.9
March	59.1
April	58.8
May	57.5
June	58.3
July	58.1
Source: HSBC