India’s Manufacturing PMI Eases To 58.1 In July
Buoyant demand also exerted pressure on prices and rising input costs contributed to the steepest increase in selling prices since October 2013
Despite a slightly softer increase in new orders and output, India’s manufacturing sector continued to post impressive growth in July. The HSBC India manufacturing purchasing managers' index (PMI), compiled by S and P Global came in at 58.1 in July, lower than June’s 58.3 reading. However, buoyant demand also exerted pressure on prices. Rising input costs contributed to the steepest increase in selling prices since October 2013.
Even after the rate of growth eased in June, production volumes were raised substantially at the start of the second quarter of the current financial year. As demand conditions remained favourable and new orders came in, the goods producers purchased additional input in July. The strong input demand drove the cost inflation higher. Manufacturers paid more for coal, leather, packaging, paper, rubber and steel, as per the report.
“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 one point to the second-highest level since early 2011,” Pranjul Bhandari, Chief India Economist at HSBC, said.
To protect the margins from cost increases, the producers raised the selling prices. Higher labour costs and demand strength led to additional adjustments in output charges.
The international sales by the Indian manufacturers registered a robust increase due to healthy demand from clients based in Asia, Europe, North America and the Middle East.
As far as the job creation is concerned, even though the increase in employment remained softer than in June, the companies continued to take on extra staff in July.
The outlook for the coming months remains unchanged as growth is expected to be supported by marketing efforts and new client enquiries. “The continuous increase in the output price index, driven by input and labour cost pressure, may signal further inflationary pressure in the economy,” Bhandari Noted.
