Manufacturing sector activity eases in July amid softer increase in output, new orders: PMI

New Delhi: The country's manufacturing sector activity moderated in July amid softer increase in output, new orders and employment, says a monthly survey.

The Nikkei India Manufacturing Purchasing Managers Index (PMI) stood at 52.3 in July, down from 53.1 in June.

This is the 12th consecutive month that the manufacturing PMI remained above the 50-point mark. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

"The recent improvement in Indian manufacturing conditions lost some impetus in July, with softer rises in output, new orders and employment," said Aashna Dodhia, Economist at IHS Markit and author of the report.

Although modest, the latest improvement in the health of the manufacturing sector was the second-strongest after June.

"We must not lose sight of the fact that the sector continued on a steady expansionary path, as production and new business rose at marked rates. Moreover, July survey data pointed to strong demand from both domestic and international sources," Dodhia said.

Although softening slightly since June, both domestic and export orders rose for the ninth consecutive month in July.

Reflecting sustained periods of growth in output and new orders, firms were encouraged to raise their staffing levels for the fourth successive month in July, the survey added.

Meanwhile, business sentiment strengthened to a three-month high, but remained below the historical average as some respondents expressed fears of a potential slowdown in the year ahead.

"Indeed, IHS Markit recently downgraded its forecast of real GDP growth to 7.1 percent in (FY) 2018, reflecting rising headwinds to expansion, including high oil prices, large capital outflows from emerging markets, and tighter domestic monetary policy," Dodhia said.

Meanwhile, the 6-member Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, is holding three-day deliberations that started on July 30 to decide on the key interest rate amid elevated oil prices and inflation.

The resolution of the MPC will be made public this afternoon.