Manufacturing PMI recovers to 3-month high

India’s manufacturing sector stopped shedding jobs for the first time in 15 months even as it registered its best performance in three months in July after contracting sharply in June, as per IHS Markit’s Purchasing Managers’ Index.

India’s manufacturing PMI, which had slipped into a contraction for the first time in 11 months to 48.1 in June, recovered to 55.3 with a marginal increase in employment during July, though the firm said it is premature to call it a complete rebound in the manufacturing jobs market.

“Although marginal, the rise in employment was the first since the onset of COVID-19. With firms’ cost burdens continuing to rise, however, and signs of spare capacity still evident, it’s too early to say that such trend will be sustained in coming months,” said Pollyanna De Lima, economics associate director at IHS Markit.

Ms De Lima, however, called the Indian manufacturing industry’s recovery from the June blip ‘encouraging’.

“Output rose at a robust pace, with over one-third of companies noting a monthly expansion in production, amid a rebound in new business and the easing of some local COVID-19 restrictions. Should the pandemic continue to recede, we expect a 9.7% annual increase in industrial production for calendar year 2021,” she averred.

Improving global demand helped bolster manufacturers’ order books with the firm noting that new export orders expanded markedly in July, following a moderate contraction in June.

“Rising sales supported a recovery in output, which increased in July after falling for the first time in 11 months during June. The rate of production growth was sharp and outpaced its long-run average,” the PMI statement said.

Though sentiment improved marginally from June, producers remain concerned about the pandemic’s path and positive sentiment ‘remained historically subdued’, the firm said.

Raw material scarcity remained a troubling spot for suppliers, leading to longer delivery times, but producers enhanced their stocking up of inputs significantly after a decline in June.

“With demand for inputs outstripping supply, there was another substantial increase in purchasing prices. The rate of cost inflation remained above its long-run average, but eased to a seven-month low,” IHS Markit noted, based on its survey of 400 manufacturing sector purchasing managers conducted between July 12 and July 26.