India’s manufacturing activity PMI slips to 58.1 in July

India’s manufacturing activity experienced a slight slowdown in July, despite favorable demand conditions and high employment levels. Inflationary pressures led to increased input costs. 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.

According to data released by S&P Global, in July India’s manufacturing activity saw a minor dip, with the S&P Global index dropping to 58.1 from 58.3 in June. Despite this decrease, the sector remained strong, significantly above the long-term average and among the highest levels observed in recent years. The decrease was attributed to softer growth in new orders and output, although overall growth remained strong.

Pranjul Bhandari, Chief India Economist, HSBC, stated, “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. New export orders remain a bright spot, rising by 1pt 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.”

The HSBC report noted several positive developments, including a notable expansion in international sales, the fastest in over 13 years, and continued job growth. However, increased demand led to rising input costs, which were the highest in nearly two years. This surge in costs resulted in the largest increase in selling prices since October 2013. To manage these higher costs, manufacturers raised their selling prices.

Production volumes, according to S&P Global, increased substantially at the start of the second fiscal quarter, although the growth rate slowed compared to June. In response to favorable demand and rising new orders, manufacturers bought more inputs, leading to higher costs for materials like coal, leather, packaging, paper, rubber, and steel.

International sales experienced significant growth, driven by demand from Asia, Europe, North America, and the Middle East, marking the second-strongest expansion rate in over 13 years. 

Additionally, companies hired more staff, offering both permanent and temporary positions. Although the increase in employment was softer than in June, it remained among the highest recorded in the survey’s history.