India’s Manufacturing Growth Moderates In July

India's manufacturing activity improved at a slower pace in July on the back of moderate growth in output, new orders and employment. The activity had improved at the fastest pace in the year so far in June.

The Nikkei India Purchasing Managers Index fell to 52.3 in July, from 53.1 in the previous month, according to a statement by IHS Markit that compiles the index. A reading below 50 indicates contraction in activity, while a number above it signals expansion. Manufacturing activity in the country has remained above the 50-point-mark for the twelfth consecutive month.

“The recent improvement in Indian manufacturing conditions lost some impetus in July, however, the sector continued on a steady expansionary path, as production and new business rose at marked rates,” said Aashna Dodhia, economist at the research firm. The index reading was the second strongest since January, only a little behind the June figure.

Input cost inflation eased from June's multi-year high, noted IHS Markit in a statement, adding that it was broadly in line with the series trend. Participants in the PMI survey cited steel and crude oil among the key items that got dearer. “It will be reassuring for policy makers to see input cost inflation easing from June's near four-year high,” Dodhia added.

Despite easing from June's six-month high, survey participants cited strong underlying demand conditions as the reason for the pick up in manufacturing activity. New orders from the overseas markets also rose for the ninth consecutive month. “Business sentiment towards the 12-month outlook for output strengthened to a three-month high,” the statement added.

Anecdotal evidence pointed to favorable market conditions, said the IHS Markit statement. As a result, manufacturing firms also raised their staffing levels for the fourth month in a row, albeit at a marginal pace.