India's manufacturing sector records lowest reading since August 2021

India’s manufacturing sector expanded at a slower pace in July, with the purchasing managers’ index falling to 53.5 from 54.2 in June, recording the lowest reading since August 2021, according to data released Monday by HSBC and S&P Global. The July figure remained above the 50 threshold that separates growth from contraction but fell below the long-run series average of 54.2. New orders grew at the second-weakest rate in over four years. Companies cited advertising efforts and demand resilience as supporting factors, while increasingly challenging market conditions and reduced client interest for key items limited sales.

Export orders showed improvement, rising at a faster rate than the previous month. Manufacturers reported gains from Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand, and the United Arab Emirates. Production volumes increased at a pace little changed from June, remaining among the softest since mid-2022. Consumer goods producers recorded notably weaker increases in new orders and output, while intermediate and capital goods makers saw stronger expansion rates.

Companies continued purchasing additional inputs to rebuild reserve buffers, though the pace of growth retreated to a 31-month low. Supply chain conditions improved, with input lead times shortening at a near survey-record pace. Stocks of purchases rose at an accelerated rate, while post-production inventories expanded at the strongest pace in over 11 years. Employment growth weakened for the third consecutive month, marking the slowest increase in the current 29-month period of uninterrupted job creation. Backlogs of work accumulated at the strongest rate in a year, though the overall increase remained slight.

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