The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index was 58.1 in July, compared with 58.3 in June. A reading above 50 indicates expansion in activity.
“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,” said Pranjul Bhandari, chief India economist at HSBC.
The flash manufacturing PMI, which was released earlier and based on 75-80% of survey responses, had indicated a faster uptick in July at 58.5.
Key positive developments seen in the latest results included one of the fastest expansions in international sales for over 13 years, according to the survey report.
Stronger demand from Asia, Europe, North America and the Middle East led to a robust increase in international sales in July.In addition to greater fees for raw materials, firms suggested that higher labour costs and demand strength sparked upward adjustments in output charges. The rate of inflation picked up to the fastest in just under 11 years.”New export orders remain a bright spot, rising by 1 pt (percentage point) to the second-highest level since early-2011,” Bhandari said.
As per the survey report, manufacturers said they have paid more for coal, leather, packaging, paper, rubber and steel.
“This creeping build-up in inflationary pressures is likely to find a mention in the upcoming MPC (Monetary Policy Committee) policy statement on August 8,” said Shreya Sodhani, regional economist, Barclays.
Barclays expects the MPC to keep policy rates unchanged, but the committee could flag the rise in price PMIs.
Bhandari said the continuous increase in the output price index, driven by input and labour cost pressure, may signal further inflationary pressure in the economy. Going ahead, growth is expected to be supported by marketing efforts and new client inquiries.