India's manufacturing PMI at 53.5 in July, export demand provides support

India's manufacturing activity remained in expansion territory in July, with the HSBC India Manufacturing Purchasing Managers' Index (PMI) coming in at 53.5 due to resilient demand and stronger export orders, as per data released on Monday. This performance has indicated a continued improvement in operating conditions as the index remained above the 50-mark that separates expansion from contraction. However, the HSBC data highlighted that the pace of growth eased from 54.2 in June. Pranjul Bhandari, Chief India Economist at HSBC said improving supplier delivery times signalled a continued easing of supply-chain bottlenecks, although geopolitical developments could pose risks. "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," she said. Manufacturers reported sustained growth in new orders and output during the month, with firms citing advertising efforts and demand resilience as factors supporting sales. However, survey participants also pointed to challenging market conditions and softer client interest for certain products. According to HSBC India, a major positive takeaway from the survey was a marked acceleration in export orders. Companies reported stronger demand from markets including Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand and the UAE. With sales continuing to rise, manufacturers increased production levels in July. In addition, intermediate and capital goods producers recorded stronger growth in output and new orders, while the consumer goods segment witnessed comparatively softer expansion. Firms also continued to rebuild inventories amid improving supply-chain conditions. Input delivery times shortened at a near survey-record pace, helping companies increase stocks of purchases. Meanwhile, inventories of finished goods also rose, recording the sharpest increase in more than 11 years. Despite the improvement in demand conditions, hiring activity moderated. Employment growth slowed and expanded at the weakest pace in the current 29-month period of job creation. Additionally, cost pressures eased during the month, with input inflation falling to a five-month low.