India’s manufacturing activity eases to 57.7 in July
India's manufacturing activity expanded in July, with the Purchasing Managers' Index (PMI) at 57.7, slightly lower than June's reading of 57.8. New orders increased, leading to an increase in production and employment. Input costs were at a nine-month high, leading to higher selling prices. Despite a seasonal slowdown, Barclays maintains its GDP growth forecast of 7.2% for 2023-24.
NEW DELHI India’s manufacturing activity, as measured by the Purchasing Managers’ Index (PMI), was at 57.7 in July as demand in the sector improved and new orders increased, according to data released by S&P Global Market Intelligence on Monday.
A reading above 50 indicates an expansion in manufacturing activity.
The seasonally adjusted manufacturing PMI was marginally lower than the June reading of 57.8. Manufacturing PMI has declined by more than one point since May, when the reading was at a 31-month high.
“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,” Andrew Hacker, Economics Director at S&P Global Market Intelligence, said in a statement.
The new orders index was at 61.6 in July, only slightly lower than 61.7 in June, according to a research note by Barclays, leading to increase in production. The pace of improvement in production has, however, been more than the increase in capacity. This prompted manufacturers to dip into inventories in July. Stocks of finished goods have reduced for six straight years, said S&P.
Employment PMI increased to 52.3 in July, 0.1 point more than THE June reading, as efforts to build inventories and improve capacity increased jobs in July. Hacker added that this would continue in the coming months, given that demand grows at the same pace. The suppliers supported the growth in capacity as the lead times reduced for the fifth consecutive month.
Input costs were at a nine-month high in July, increasing labour costs and prices of raw materials, especially cotton. The firms passed this increase in cost on to consumers, increasing their selling prices.
The momentum might see a seasonal slowdown despite an 8.2% increase in core sector growth, Barclays said in its research note. The increase in growth of the eight core industries came from a lower base and might see a slowdown in the coming months, as arrival of the monsoon might soften growth in transport, said Barclays. The growth rates of air traffic, rail freight and vehicle production were sluggish in the past two months. These factors, however, did not change the GDP growth forecast by Barclays of 7.2% for 2023-24.