PMI Manufacturing slips to near 5-year low in July

The manufacturing sector moderated in July, as the Purchasing Manager’s Index (PMI) for the month slipped to a five-year low to 53.5 as against 54.2 in June, S&P Global reported on Monday. Job creation also weakened in July. The index is below the long-run series average of 54.2. According to the agency, manufacturers in India continued to benefit from demand resilience, with a sustained rise in new orders underpinning a further expansion in output during July. “However, growth cooled across some metrics such as total sales, input purchasing and employment,” it said. The index is derived from responses given by purchasing executives of 400 companies. An index above 50 means expansion and below 50 contraction. “The suppliers’ delivery times index rose in July, an encouraging sign that supply chain delays are continuing to unwind. However, renewed tensions in West Asia have raised fresh doubts about how durable these improvements will be,” Pranjul Bhandari, Chief India Economist at HSBC, said. Further, manufacturers appear to be rebuilding buffers: inventories of both inputs and finished goods increased alongside a rise in purchasing volumes, suggesting firms are securing supply and limiting exposure to potential disruption. In terms of operating capacity, the agency noted only a small proportion of firms indicated greater backlogs of work. The overall rate of accumulation was the strongest in a year, albeit only slight overall. “Job creation across India’s manufacturing industry weakened for the third straight month in July. The rate of increase in employment was the slowest in the current 29-month period of uninterrupted growth,” it said, while adding that cost pressures receded to their weakest in five months, though companies continued to report higher prices for transportation in particular. Meanwhile, “there was a moderate increase in selling prices that was broadly similar to June,” it said. Talking about business sentiment, the agency highlighted that it strengthened from June’s recent low, with firms signalling a positive outlook for demand, infrastructure projects and new client enquiries. Some businesses expected market conditions to improve and hoped their marketing initiatives would pay off. Summing up the report, Bhandari said 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 concluded.