India Manufacturing Purchasing Managers' Index (PMI) at a four-month high of 51.8 in July

The performance of India's manufacturing economy continued to improve in July, with a stronger expansion in new business contributing to faster increases in output and buying levels. Although some firms added to their workforces, overall job creation was negligible. Meanwhile, input cost inflation softened and while output prices were raised at the quickest pace in three months, the rate of charge inflation was only slight.

Posting a four-month high of 51.8 in July (June: 51.7), the seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) -indicated a further improvement in overall business conditions across the sector. The upward movement in the headline index came from stronger contributions from four of its five components, the exception being suppliers' delivery times.

 

Supported by greater demand from both the domestic and external markets, total new business rose at the fastest pace since March. The expansion in order books was led by consumer goods producers. Growth of new export orders climbed to a six-month high, with increases seen in the consumer and capital goods categories.

Indian manufacturers stepped up production, with July's upturn being the most pronounced since March. The overall increase in output was led by consumer goods producers, although growth was also recorded in the intermediate goods category.

July data highlighted ongoing pressure on the capacity of Indian manufacturers, as outstanding business rose for the second month in succession. Furthermore, the rate of backlog accumulation was the fastest in one-and-a-half years.

Despite this, hiring trends remained relatively muted. Only 1% of surveyed companies took on additional workers in July, while almost all the remaining respondents signalled no change in payroll numbers. Underpinned by stronger growth of new orders, businesses purchased additional inputs for use in the production process. The rate of expansion climbed to an 11-month high. Subsequently, stocks of raw materials and semi-finished goods rose.

Conversely, holdings of finished goods declined in July, but to the least extent in six months. Some respondents commented on the fulfilment of orders from stocks.

On the price front, July saw input costs rise at the slowest pace in five months. Although charge inflation accelerated, the rate of increase was only slight and remained below its long-run average. Finally, supplier performance improved for the first time since February, albeit marginally.

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