India’s manufacturing sector saw its slowest pace of activity expansion in nearly five years in July, according to HSBC India Manufacturing Purchasing Managers’ Index (PMI) data released on Monday.However, the manufacturing activity remained in expansion territory with the seasonally adjusted HSBC India Manufacturing PMI declining to 53.5 in July from 54.2 in June, its lowest reading since August 2021. The index stayed above the 50 threshold that distinguishes expansion from contraction, signalling that manufacturing conditions continued to improve.
Decoding the numbers
The survey indicated that resilient demand continued to support the sector, although the pace of growth in new orders, input purchases and hiring moderated during the month, according to an ANI report.“Manufacturers in India continued to benefit from demand resilience, with a sustained rise in new orders underpinning a further expansion in output during July. Growth cooled again across some metrics, however, such as total sales, input purchasing and employment,” the report said.Despite softer demand in the domestic market, export orders strengthened in July, with manufacturers reporting higher sales to destinations including Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand and the UAE. Factory output also increased further, although the pace of expansion remained among the slowest recorded since the middle of 2022.The survey found that Indian manufacturers continued to replenish inventories as supply chain conditions improved further. Delivery times for inputs shortened at one of the fastest rates recorded in the survey’s history, while inventories of both raw materials and finished goods increased during the month.Commenting on the findings, Pranjul Bhandari, Chief India Economist at HSBC, said, “The suppliers’ delivery times index rose in July, an encouraging sign that supply chain delays are continuing to unwind. However, renewed tensions in the Middle East have raised fresh doubts about how durable these improvements will be.”She added, “Meanwhile, output and new export orders strengthened, pointing to resilient demand, particularly from overseas markets. Price pressures also shifted: input cost inflation moderated, but output charge inflation accelerated, indicating firms are once again passing through price increases to protect margins.”The report also showed that employment growth slowed for a third straight month, with hiring expanding at its weakest pace during the current 29-month period of uninterrupted growth. At the same time, input cost inflation eased to a five-month low despite transportation expenses remaining elevated. Business confidence, however, improved from June’s recent low as manufacturers expressed optimism over stronger demand, infrastructure-led activity and an increase in new client enquiries.The HSBC India Manufacturing PMI is compiled by S&P Global using responses from around 400 manufacturing companies across India.