India Manufacturing PMI Slips In July After June Rebound

A gauge of India's manufacturing sector fell in July, reflecting the impact that localised lockdowns are having on manufacturing activity. These lockdowns have been imposed by state and local governments to curb the spread of Covid-19.

The India Manufacturing Purchasing Managers' Index, compiled by IHS Markit, stood at 46 in July compared with 47.2 in June on a seasonally adjusted basis, according to a release on Monday. A print below 50 indicates contraction in business activity.

The data shed light on the state of economic conditions in one of the countries worst affected by the pandemic, said Elliot Kerr, economist at IHS Markit, in a media release.

To be sure, the index remains well above the levels seen in April and May, when a nationwide lockdown was in place. The index had fallen to a record low of 7.2 in April.

Subdued demand was evidenced by another marked decrease in new orders placed with manufacturers during July, the release said. When explaining falling sales, panelists often cited prolonged closures at their clients' businesses, it added. Export orders continued to remain a drag among global uncertainty over the duration of the pandemic.

Softer inflows of new orders, also pushed producers to pare back purchasing activity in July. On the cost front, manufacturers reported another decrease in input prices during July. However, the rate of reduction was modest and the slowest in the current four-month sequence of falling costs. Comments from panelists indicated that subdued demand for most goods more than offset the inflationary effects of shortages in some raw materials.

Deteriorating demand conditions led Indian manufacturers to continue cutting staff numbers during July.

However, manufacturers were increasingly optimistic regarding future activity. Sentiment towards the 12-month business outlook improved for the second month in a row to reach a five-month high. It still remained below the historical average.