India's Manufacturing Activity Remains Strong In July

India's manufacturing sector continued to grow at a strong pace in July, despite slightly softer increases in new orders and output, a private survey showed.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index was little changed, at 58.1 in July from 58.3 in June. The latest reading exceeded the series long-run average and was one of the highest seen in recent years, according to the release. Buoyant demand conditions created a ripple effect across the manufacturing industry, mainly through a substantial upturn in new work intakes. Despite slowing since June, the pace of sales growth was sharp in terms of historical data.

With demand conditions remaining favourable and new orders coming in, goods producers purchased additional inputs in July. The rate of expansion was sharp, with more than a quarter of panelists raising their buying levels. In turn, strong input demand drove cost inflation higher. The overall rate of increase was notable and among the fastest in less than two years. Manufacturers reported having paid more for coal, leather, packaging, paper, rubber, and steel.

Indian goods producers sought to protect margins from cost increases by raising selling prices. In addition to greater fees for raw materials, firms suggested that higher labour costs and demand strength sparked upward adjustments to output charges. The rate of inflation picked up to the fastest in just under 11 years.

Amid reports of strengthening demand from clients based in Asia, Europe, North America, and the Middle East, Indian manufacturers experienced a robust increase in international sales during July. The overall growth rate was notable and the second-highest in more than 13 years.

Companies continued to take on extra staff in July. 7% of the panellists noted job creation, while 92% reported no change in headcounts.

Finally, the overall level of positive sentiment towards the year-ahead outlook for production has been broadly unchanged since June. Growth is expected to be supported by marketing efforts and new client inquiries.