India’s manufacturing sector rebounded in July with sales and production growing at the fastest pace since November 2021, as per the S&P Global India Manufacturing Purchasing Managers’ Index which touched 56.4 from a nine-month low of 53.9 in June.
A reading of 50 on the PMI indicates no change in level of activity from the previous month and the Survey-based index suggested ‘marked gains’ in new business orders during July, even though job creation remained marginal amid an uncertain outlook.
Although costs continued to rise, the inflation rate in manufacturing inputs eased to an eleven-month low. Chemicals, electronic components, metals, textiles and transportation fees were reportedly higher during the month, even as the pass-through of higher costs to output prices moderated to the lowest in four months.
“Inflation rates, for both input prices and output charges, were most acute in the capital goods segment. The weakest rises were noted in the intermediate goods sub-sector,” S&P Global said.
There was a noticeable slowdown in new export orders which grew at slowest pace in four months in July, even as aggregate new orders recovered smartly in July from the loss in growth momentum in the previous month. This is the thirteenth month in a row that factory orders and production recorded growth.
The uptick in July, however, hasn’t changed the outlook dramatically among most producers, with 96% of them expecting no change in output levels over the coming year. This is only marginally better than June, when business sentiment had slipped to a 27-month low.
This uncertainty about the future also constrained hiring activity, which remained marginal, with 98% of firms opting to leave workforce numbers unchanged as there was no pressure on operating capacities. “Despite the solid performance of the manufacturing industry, overall job creation remained subdued. The latest increase in employment was marginal and broadly similar to those seen in the current five-month sequence of growth,” S&P Global noted.
Pollyanna De Lima, economics associate director at S&P Global Market Intelligence said July marked a ‘welcome combination of faster economic growth and softening inflation’ for producers. “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,” she added.
“…Firms were successful in their efforts to obtain inputs amid a second consecutive improvement in supplier performance. This in turn supported a near-record increase in inventories of raw materials and semifinished goods as well as a softer upturn in input costs,” Ms. De Lima said.
