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Business News/ Economy / India’s manufacturing PMI eases for second month to 57.7 in July
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India’s manufacturing PMI eases for second month to 57.7 in July

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, S&P said.

The reading marked over two years of the index being above the 50-mark, which separates expansion from contraction.Premium
The reading marked over two years of the index being above the 50-mark, which separates expansion from contraction.

New Delhi: India's manufacturing activity dipped marginally in July though buoyant demand helped maintain growth momentum, a private survey on Tuesday said.

The S&P Global purchasing managers’ index (PMI) for manufacturing, fell to 57.7 in July from 57.8 in June, and 58.7 in May. A figure above 50 implies expansion and a reading below that denotes contraction.

Higher inflationary pressures remained a key challenge despite easing in the recent months, it 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," said Andrew Harker, economics director at S&P Global Market Intelligence.

"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," Harker said.

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, he added.

While domestic manufacturing maintained a strong momentum, growth in new export business picked up to the fastest since last November 2022.

"With new orders up sharply again, manufacturers expanded production accordingly. Output has increased continuously on a monthly basis since July 2021," the report said.

"The solid pace of job creation was broadly in line with those seen in May and June. 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," it added.

Interestingly, while the RBI has raised interest rates by 250 basis points since May 2022, it has held the repo rate at 6.50% since April. The repo rate is predicted to remain unchanged until next year.

According to S&P, the rate of input cost inflation accelerated to a nine-month high in July, but remained softer than the series average.

"Where input prices increased, panelists reported higher costs for raw materials, in particular cotton. These higher prices for raw materials, plus rising labour costs, led firms to increase their selling prices," the report said.

"The rate of inflation was solid, but eased to a three-month low," it added.

Meanwhile, firms expect demand to remain elevated over the coming years, thus supporting projections of production growth.

"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," the report added.

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Published: 01 Aug 2023, 10:49 AM IST
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