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India’s manufacturing PMI surges to four month high at 51.8 in July on strong demand

01 Aug 2016 Evaluate

Manufacturing sector growth continued its uptrend and hit a four-month high in July, backed by stronger upturn in new business orders. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) - a composite single-figure indicator of manufacturing performance - rose to 51.8 in July from 51.7 in June. The upward movement in the headline index came from stronger contributions from four of its five components, the exception being suppliers’ delivery times.

According to the survey, greater demand from both the domestic and external markets, total new business rose at the fastest pace since March supporting the PMI. The expansion in order books was led by consumer goods producers. Growth of new export orders climbed to a six-month high, with increases seen in the consumer and capital goods categories. Further, Indian manufacturers stepped up production, with July’s upturn being the most pronounced since March. 

As per the report, the July data highlighted ongoing pressure on the capacity of Indian manufacturers, as outstanding business rose for the second month in succession. Furthermore, the rate of backlog accumulation was the fastest in one-and-a-half years. Despite this, hiring trends remained relatively muted with, only 1% of surveyed companies took on additional workers in July, while almost all the remaining respondents signaled no change in payroll numbers.

On the price front, July saw input costs rise at the slowest pace in five months. Although charge inflation accelerated, the rate of increase was only slight and remained below its long-run average. Besides, supplier performance improved for the first time since February. Some respite came to firms with cost burdens rising at a modest and slower rate and the improving demand environment meant that businesses were able to raise their own charges in July.


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