India's Manufacturing PMI Eases For Second Month Straight, At 57.7 in July

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) eased for the second month in a row to 57.7 in July 2023, signalling a further substantial improvement in the health of the sector. Also, business conditions have now strengthened in each of the past 25 months. Although, the country's manufacturing PMI showed a slight sign of losing momentum, nevertheless, it continued to be the star performance on a global level.

In June month, the manufacturing PMI stood at 57.8.

On the latest data, Andrew Harker, Economics Director at S&P Global Market Intelligence said, "The Indian manufacturing sector showed little sign of losing growth momentum in July as production lines continued to motor on the back of strong new order growth."

He further explained that pressure continued to come on capacity, prompting firms to expand employment solidly again, a trend that is likely to continue in the months ahead should demand remain strong.

Overall, he concluded that all in all, the Indian manufacturing sector has maintained its position as one of the star performers globally, bucking the trend of demand weakness seen in other parts of the world.

As per S&P Global's statement, the Indian manufacturing sector maintained strong growth momentum at the start of the third quarter amid ongoing buoyant demand. Rates of expansion in output and new orders were only marginally softer than in June, with firms expanding their employment and purchasing activity accordingly. Cost inflationary pressures remained relatively muted.

Also, reports of demand improvements were widespread across the latest survey and resulted in another marked expansion of new orders in the sector. The rapid increase was broadly in line with that seen in the previous survey period.

Meanwhile, it said, "growth in new export business picked up to the fastest since last November. Respondents noted increases in new orders from customers in the US and neighbouring countries such as Bangladesh and Nepal."

That being said, owing to a sharp rise in new orders, manufacturers expanded production accordingly. Output has increased continuously on a monthly basis since July 2021. The latest rise was substantial, albeit the softest in three months.

Moreover, firms responded to greater workloads by taking on extra staff. The solid pace of job creation was broadly in line with those seen in May and June. As per S&P, this expansion in capacity was not sufficient to prevent a further build-up in backlogs of work, however, given the strength of the rise in new orders. Outstanding business increased for the nineteenth successive month, albeit only slightly.

Going ahead, S&P cited that firms generally expect demand to remain elevated over the coming year, supporting projections for growth of production. There were some reports that customers had responded well to recent new order deliveries and were expected to commit to more over the coming months. Confidence was slightly lower than that seen in June but remained above the series average. Around 32% of respondents predicted a rise in output, with just 2% pessimistic.