The manufacturing sector activity slowed to a five year low in July, with the PMI slipping to 53.5 – its lowest level since August 2021, as sales, input purchases and hiring slowed despite resilient export demand.
According the HSBC India’s manufacturing PMI, across the private sector manufacturing segment hiring weakened for the third straight month in July.
The private sector manufacturing activity expanded at its slowest pace in nearly five years in July as total sales, input purchasing and job creation slowed amid renewed tensions in West Asia, HSBC said on Monday.
The Manufacturing Purchasing Managers' Index (PMI), which tracks monthly changes in manufacturing activity, fell to 53.5 in July from 54.2 in June. The July reading is also the lowest since August 2021, when it was 52.3.
"The suppliers’ delivery times index rose in July, an encouraging sign that supply chain delays are continuing to unwind. However, renewed tensions in the Middle East have raised fresh doubts about how durable these improvements will be. In response, 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," said Pranjul Bhandari, chief economist at HSBC India.
Growth in new orders was the second-weakest in over four years, with panel members citing increasingly challenging market conditions and reduced client interest in key items as the major reasons, the survey said. In terms of sales too, the pace of growth was among the softest since mid-2022.
"Consumer goods sector was a particular area of weakness in July, posting notably softer increases in new orders and output. Intermediate and capital goods makers registered stronger rates of expansion for both measures (new orders and output)," she said, adding purchases of additional inputs also retreated to a 31-month low.
More importantly, job creation across the 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," she noted.
However, cost pressures receded to their weakest in five months, though companies continued to report higher transportation costs in particular. Meanwhile, there was a moderate increase in selling prices that was broadly similar to June, the survey said.
"Meanwhile, 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," Bhandari said.