India's manufacturing PMI hits 5-year low at 53.5 in July

One of the standout trends in the July survey was the continued strength in export demand, with manufacturers reporting a noticeable increase in new orders from overseas markets. Companies cited stronger demand from countries including Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand and the UAE. The rise in export orders helped support overall production during the month, even as some businesses reported softer client interest for certain products and challenging market conditions in parts of the domestic market. According to the survey, firms also continued to benefit from advertising efforts and resilient customer demand, which contributed to sustained growth in both output and new business, with output and new export orders strengthening, pointing to resilient demand, particularly from overseas markets. However, new orders grew at the second-weakest rate in over four years, indicating some moderation in overall demand momentum.

Manufacturing companies responded to rising orders by increasing production levels during July, with producers of intermediate and capital goods registering stronger growth in both output and new orders, while the consumer goods segment expanded at a comparatively slower pace. The survey pointed to a further easing of supply-chain constraints, with delivery times for inputs improving at one of the fastest rates recorded in the survey's history. Companies increased purchases of raw materials, while stocks of finished goods rose at the quickest pace in more than 11 years, reflecting greater confidence in future demand and smoother logistics. This improvement enabled manufacturers to replenish inventories more efficiently and sustain production levels despite the overall slowdown in growth momentum. However, companies continued purchasing additional inputs to rebuild reserve buffers, though the pace of growth retreated to a 31-month low, suggesting some moderation in inventory rebuilding efforts.

Cost pressures showed mixed trends across the regions, with India experiencing some relief while Japan continued to face inflationary pressures. Input cost inflation eased to a five-month low in July even as transportation costs continued to rise, providing some relief to manufacturers. However, firms also increased the prices charged to customers at a faster pace, indicating that businesses continued to pass on part of their costs in an effort to protect profit margins. The cost pressures prompted companies to raise output prices sharply, though at a slower rate than in June. As reported by IANS, business confidence also improved from June's recent low on expectations of stronger demand, infrastructure spending and new client enquiries, suggesting manufacturers are adopting a more measured approach to pricing strategies amid the evolving economic environment.

Employment trends showed mixed patterns across the regions, with India's job market showing signs of cooling despite continued expansion. Despite continued expansion in production and orders, employment growth slowed during July, with the pace of hiring the weakest recorded during the current 29-month period of employment growth. The moderation suggests that while businesses remain optimistic about demand, they are adopting a more measured approach to workforce expansion amid an evolving economic environment. The rate of job creation weakened for the third consecutive month to the slowest rate in the current 29-month expansion cycle, with the pace of employment growth at its slowest pace in that entire period, indicating a loss of momentum in the labor market despite sustained manufacturing activity. Backlogs of work accumulated at the strongest rate in a year, though the overall increase remained slight, suggesting some pressure on capacity utilization despite the overall slowdown in growth momentum.