India's Manufacturing Growth Slows In July As HSBC PMI Falls To 53.5

New Delhi, Aug 3 (KNN) India's manufacturing sector continued to expand in July, supported by resilient demand and rising new orders, although the pace of growth moderated across several key indicators, according to the HSBC India Manufacturing Purchasing Managers' Index (PMI).

The seasonally adjusted HSBC India Manufacturing PMI fell to 53.5 in July from 54.2 in June, marking the lowest reading since August 2021 and falling below the long-run series average of 54.2.

New Orders Rise Despite Moderating Growth

New orders continued to rise, although the rate of expansion was the second-weakest in more than four years. Manufacturers attributed demand resilience to advertising activity and customer demand, while increasingly challenging market conditions and weaker interest in some products limited sales growth.

New export orders recorded a faster and marked increase, with companies reporting stronger demand from markets including Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand and the UAE.

Output Growth Continues Amid Softer Domestic Demand

Rising new orders supported continued growth in output, although the pace remained among the weakest since mid-2022. Consumer goods recorded particularly softer growth in new orders and output, while intermediate and capital goods manufacturers registered stronger expansions.

Manufacturers continued to build inventories to strengthen supply buffers. Input purchasing increased, although the rate of expansion eased to a 31-month low.

Stocks of purchases rose at a faster pace than in June, while finished goods inventories recorded their strongest accumulation in more than 11 years.

Supply Chain Conditions Improve, Costs Remain Elevated

Supply chain conditions improved significantly during the month, with input lead times shortening at a near-record pace. However, manufacturers continued to face higher operating costs, particularly transportation expenses. Overall input cost inflation eased to a five-month low.

Selling prices increased moderately, broadly in line with June, as companies sought to protect margins amid cost pressures.

Employment growth weakened for the third consecutive month, with the pace of job creation slowing to its weakest level in the current 29-month period of uninterrupted expansion.

HSBC Flags Supply Chain Risks From Middle East Tensions

Pranjul Bhandari, Chief India Economist, HSBC, said the improvement in supplier delivery times indicated that supply-chain delays were continuing to ease, although renewed tensions in the Middle East could affect the durability of the improvement.

She said manufacturers were rebuilding inventory buffers amid potential supply disruptions, while stronger output and export orders indicated resilient demand, particularly from overseas markets.

Business confidence improved from June's recent low, with companies expressing optimism over demand, infrastructure projects and new client enquiries. Firms also expected market conditions to improve and anticipated gains from marketing initiatives.

(KNN Bureau)