As demand remained buoyant in July, the manufacturing sector in India bucked the global trend and reported strong growth. Purchasing Managers’ Index or PMI for India Manufacturing in July was at 57.7, roughly in line with June’s reading of 57.8. As firms increased employment and purchasing activity, output and new orders expanded only marginally softer than in June. Cost inflationary pressures remained relatively muted.
There has been an improvement in the health of the sector in each of the past 25 months, according to the index. The latest survey revealed widespread evidence of improving demand, which resulted in another marked increase in new orders. The rapid increase was roughly in line with the previous period’s.
Andrew Harker, Economics Director at S&P Global Market Intelligence, declared that India’s manufacturing sector has maintained its place as one of the leading players globally, despite the downturn in demand seen in other nations. In July, it sustained momentum thanks to persistent new orders and the consequent need to extend employment further. It is expected that this trend will maintain should demand stay solid.
New export orders rose to the fastest since November, with respondents citing an increase in customers from the US and neighboring countries like Bangladesh and Nepal. With new orders up sharply again, manufacturers expanded production accordingly. Since July 2021, output has increased on a monthly basis. Despite being the softest in three months, the latest increase was substantial.
In response to increased workloads, firms hired more staff, and job growth was roughly in line with June and May. However, given the strength of the increase in new orders, this expansion in capacity was not enough to prevent a further build-up in backlogs of work. Outstanding business increased for the nineteenth consecutive month, but only slightly.
In July, firms utilised their stock holdings to fulfil new orders, and stocks of finished goods have been falling for the last half decade. When beginning the third quarter, purchasing activity was only slightly lower than its 12-year high in May. Additionally, there was a marked surge in the stocks of purchases as companies looked to increase inventory due to the strong demand.
A faster delivery rate from suppliers was helpful to manufacturers in their efforts to build stocks 50. In July, input cost inflation accelerated to a nine-month high, but remained softer than the series average. Lead times shortened marginally for the fifth month in a row. Input prices increased for raw materials, particularly cotton, which respondents reported higher costs.
Raw materials and labour costs being higher caused firms to push up their prices. Inflation stayed robust but fell to its lowest three-month figure. Companies are hoping there will be steady demand over the upcoming year, thus expecting a rise in output. Good reactions to order deliveries and expected further requests bode well for the future. There was a slight decrease in confidence compared to June, however it is still more than the regular level. From the survey respondents, 32% were hopeful that output would increase and only 2% had a pessimistic outlook.
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