Manufacturing growth in India scales 17-month high as optimism abounds

Updated: Friday, August 1, 2014, 11:47 [IST]

Business conditions in the Indian manufacturing sector improved for a ninth consecutive month in July, as companies scaled up production in response to robust levels of demand, The HSBC Manufacturing Purchasing Managers' Index (PMI), compiled by Markit said. However, employment deteriorated fractionally, while inflationary pressures continued to emerge, particularly on the supply side

The HSBC Manufacturing Purchasing Managers' Index (PMI), compiled by Markit, rose to 53.0 in July from 51.5 in June, its highest since February 2013.

In line with the headline indicator, output grew at the quickest rate since February 2013 in July, marking a nine-month period of increased production. Anecdotal evidence associated solid output growth with strengthening order books. Among the monitored sub-sectors, producers of intermediate goods scaled up production at the sharpest pace.

July data confirmed reports of further improvements in demand as new orders increased at an accelerated pace, extending the current sequence of growth to nine months. Sector figures indicated a marked rise of new work intakes in the intermediate goods category.

New business from abroad rise

New business from abroad rose for a tenth successive month in July. Panellists commented on strong demand from key export clients.

Commenting on the India Manufacturing PMI survey, Frederic Neumann, Co-Head of Asian Economic Research at HSBC said: "Finally, the manufacturing sector is starting to pick up steam. A flood of new orders from both domestic and external sources has led to a surge in activity, pushing the manufacturing PMI to a 17-month high. Details within the survey show that all monitored categories witnessed a rise in output and order flows. A quick word of caution, however. The speed of the recovery has also lifted price pressures, with input prices rising steeply. This means that the RBI may not cheer as loudly as the rest of us."

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