Growth in Indian manufacturing experienced a slight deceleration in July, attributed to moderate increases in new orders and output, according to a survey conducted by a private agency on Thursday.

The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, registered at 58.1 for the month, a minor decrease from June's 58.3 reading. The index has consistently remained above the 50-point threshold, indicating expansion, since July 2021.

Indian manufacturing saw international sales grow at the fastest rate in over 13 years, with job creation remaining strong and selling prices witnessing the steepest rise since October 2013.

"Robust demand conditions had a significant impact across the manufacturing sector, primarily through a notable increase in new work orders. Despite a slight slowdown from June, the growth rate of sales was still sharp compared to historical data," the survey reported.

"India's headline manufacturing PMI showed a slight deceleration in the rate of expansion in July. However, with most components maintaining robust levels, this minor drop is not a cause for concern," stated Pranjul Bhandari, HSBC's chief India economist.

"New export orders continue to be a highlight, increasing by 1 point to the second-highest level since early 2011. The ongoing rise in the output price index, driven by input and labor cost pressures, could indicate further inflationary pressures within the economy," she added.

The survey highlighted a substantial increase in production volumes at the beginning of the second quarter of FY24, though the growth rate had slowed from June. The manufacturing PMI was almost six points above the average since the survey began in March 2005.

"With favorable demand conditions and incoming new orders, manufacturers increased their input purchases in July. The rate of expansion was sharp, with over a quarter of participants reporting higher purchasing levels. Consequently, strong input demand pushed cost inflation higher. Manufacturers reported increased costs for coal, leather, packaging, paper, rubber, and steel," the survey noted.

The survey also indicated that companies continued hiring in July, with anecdotal evidence suggesting offers for both permanent and short-term contracts.

"Although the increase in employment was softer than in June, it remained one of the strongest in the survey's history. While 7 percent of respondents noted job creation, 92 percent reported no change in headcounts," the survey observed.

The July manufacturing PMI was slightly below the flash estimate of 58.5 for the month but marked the 37th consecutive month of output growth since July 2021.

Monthly PMI figures are as follows:

  • January 2023: 55.4
  • February: 55.3
  • March: 56.4
  • April: 57.2
  • May: 58.7
  • June: 57.8
  • July: 57.7
  • August: 58.6
  • September: 57.5
  • October: 55.5
  • November: 56.0
  • December: 54.9
  • January 2024: 56.5
  • February: 56.9
  • March: 59.1
  • April: 58.8
  • May: 57.5
  • June: 58.3
  • July: 58.1

(Source: HSBC)