According to a new HSBC survey issued on Thursday, India’s manufacturing activity expanded at a healthy rate in July due to both strong local demand and fresh export orders.
“With demand conditions remaining favourable and new orders coming in, goods producers purchased additional inputs in July,” according to the poll.
The S&P Global-compiled HSBC final India Manufacturing Purchasing Managers’ Index (PMI) was 58.1 last month, roughly unchanged from the June reading of 58.3.
Since July 2021, the index has been over the 50-point threshold that divides expansion from contraction. This represents the longest period of expansion in the previous 11 years.
“India’s headline manufacturing PMI showed a marginal slowdown in the pace of expansion in July, but with most components remaining at robust levels, the small drop is no cause for concern,” According to the survey, exports increased at the second-fastest rate in 13 years due to increased demand from nations in Asia, Europe, North America, and the Middle East, while domestic demand saw a solid increase in new orders.
According to HSBC’s senior India economist Pranjul Bhandari, “new export orders remain a bright spot, rising by 1 point to the second-highest level since early 2011.”
Businesses continued to hire more employees, indicating that the prognosis for the upcoming year was still positive. According to the study, hiring continued to move at a healthy pace even if it was slower than in June.
Nonetheless, both the input and output price sub-indices increased due to strong demand. Over 25% of panelists increased their buying levels, indicating a sharp expansion rate. Strong input demand, in turn, increased cost inflation. According to the poll, manufacturers said they were paying more for steel, coal, rubber, paper, packaging, and leather.
“The continuous increase in the output price index, driven by input and labour cost pressure, may signal further inflationary pressure in the economy,” Bhandari stated.
