India's manufacturing growth slows to near five-year low in July despite resilient demand: HSBC PMI
New Delhi, August 3
India's manufacturing sector continued to expand in July, although the pace of growth eased to its weakest level in nearly five years, according to the HSBC India Manufacturing Purchasing Managers' Index released on Monday.
The seasonally adjusted HSBC India Manufacturing PMI slipped to 53.5 in July from 54.2 in June, marking the lowest reading since August 2021. However, the index remained above the 50-mark that separates expansion from contraction, indicating continued improvement in manufacturing conditions.
The report said manufacturers continued to benefit from resilient demand, although growth in new orders, input purchasing and employment moderated.
"Manufacturers in India continued to benefit from demand resilience, with a sustained rise in new orders underpinning a further expansion in output during July. Growth cooled again across some metrics, however, such as total sales, input purchasing and employment," the report said.
However, despite softer domestic demand, export orders gathered momentum during the month, with firms reporting stronger sales to countries including Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand and the UAE. Output also continued to rise, although the pace of expansion remained among the weakest since mid-2022.
The survey noted that Indian manufacturers continued rebuilding inventories as supply-chain conditions improved. Input delivery times shortened at a near survey-record pace, while stocks of both purchases and finished goods increased.
Commenting on the survey, Pranjul Bhandari, Chief India Economist at HSBC, said, "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."
She added, "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."
The report also showed employment growth weakening for the third consecutive month, with job creation recording its slowest pace in the current 29-month period of uninterrupted expansion. Meanwhile, cost pressures eased to a five-month low even as transportation costs remained elevated, while business confidence improved from June's recent low on expectations of stronger demand, infrastructure projects and fresh client enquiries.
The HSBC India Manufacturing PMI is compiled by S&P Global based on responses from around 400 manufacturers across the country.
— ANI
Reader Comments
The headline says "slows to near five-year low" but then the article says it's still above 50, meaning expansion. A bit clickbait-y, no? 😅 That said, as someone who works in supply chain, I'm glad to see input delivery times improving. That's a real relief after the chaos we had post-COVID. The Middle East situation is worrying though – if that escalates, we could see shipping costs spike again. Let's hope it stays stable. Also, employment growth slowing is a concern, but not surprising given how cautious companies are being globally.
Good to see exports doing well – I read that orders from Egypt, Nepal, and Thailand are up. This is what Make in India should look like! But domestic demand cooling is a bit worrying. With the festive season coming up, I hope we see a rebound in the next few months. The input cost inflation easing is a good sign for manufacturers, but the fact that output charge inflation accelerated means firms are passing on higher prices to consumers. That might dampen demand further. Let's see how it plays out.
Interesting read from the other side of the world. I work for a US-based firm that sources components from Indian suppliers, and we've definitely seen improvements in their delivery times and quality. The export numbers reflect that – we're actually increasing our orders from India because prices are competitive and reliability has improved. But the slowdown in domestic growth is something to watch. India has so much potential; I hope the government keeps pushing infrastructure and digitization to sustain this momentum.
"Resilient demand" – but for whom exactly? Small manufacturers are struggling, not just with orders but with access to credit and rising compliance costs. The PMI is an aggregate, but on the ground, many MSMEs are feeling the pinch. The government's PLI schemes are great for big players, but
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