Consumer goods lead upturn

Manufacturing activity expanded at a quicker rate in July due to an increase in new orders and the resultant scaling up of production by companies, according to a private sector survey.

The Nikkei India Manufacturing Purchasing Managers’ Index came in at 52.5 in July, up from the 52.1 in June. A reading over 50 indicates an expansion while one below 50 denotes a contraction.

“Economic growth in India’s manufacturing industry was sustained in July,” the report said.

“Companies scaled up production in response to a quicker upturn in factory orders. This, coupled with optimistic growth projections, underpinned job creation and an uptick in input purchasing.”

“Rising from 52.1 in June to 52.5 in July, the IHS Markit India Manufacturing Purchasing Managers’ Index was consistent with a further strengthening in the health of the sector,” the report added. “The latest reading was slightly higher than the average for calendar year 2018 (52.3), but below its long-run trend (53.9).”

The report said consumer goods producers led the upturn in July, for the third consecutive month, adding that even the intermediate goods makers saw a stronger improvement in business conditions in July.

“The capital goods sub-sector dipped into contraction, with lower sales causing reductions in output and quantities of purchases, while job creation came to a halt,” the report said.

“Survey participants linked the uptick in growth to a pick-up in demand, mostly stemming from successful marketing efforts, competitive pricing and favourable public policies,” Pollyanna de Lima, Principal Economist at IHS Markit, said.

Ms. de Lima added that the underlying data showed that the main impetus for sales growth was coming from the domestic market, with international orders increasing the least in 15 months.

“New export orders also continued to rise, but here a slowdown in growth was noted,” the report said. “In fact, external sales rose to the least extent since April 2018 as factories took a hit from subdued global trade flows.”