Manufacturing contracts for fourth straight month: July PMI

Contraction quickens on muted demand amid prolonged closures, survey shows

India’s manufacturing sector activity contracted at a slightly faster pace in July as demand conditions remained subdued amid prolonged closures, following which firms reduced both staff numbers as well as purchasing activity, a monthly survey showed on Monday.

The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) stood at 46 in July, down from 47.2 in June.

This is the fourth straight month of contraction for the Indian manufacturing sector. In April, the index had slipped into contraction mode, after remaining in growth territory for 32 consecutive months. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

“Latest PMI data from Indian manufacturers shed more light on the state of economic conditions in one of the countries worst affected by the COVID-19 pandemic,” Eliot Kerr, economist at IHS Markit, said.

The survey showed a re-acceleration of declines in the key indices of output and new orders, undermining the trend towards stabilisation seen over the past two months, Mr. Kerr said.

“Anecdotal evidence indicated that firms were struggling to obtain work, with some of their clients remaining in lockdown, suggesting that we won’t see a pick-up in activity until infection rates are quelled and restrictions can be further removed,” he added.

Output contracted at a slightly faster pace than in June as demand conditions remained subdued with some businesses still closed amid lockdown extensions.

Export orders fall

Moreover, export orders also witnessed a decline.

Deteriorating demand conditions led manufacturers to continue cutting staff numbers during July.

On the cost front, manufacturers reported another decrease in input prices, IHS Markit said, adding that subdued demand for most goods more than offset the inflationary effects of shortages in some raw materials.

However, despite the ongoing negative impact of COVID-19, sentiment towards future activity improved for the second month running.

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