New Delhi [India], August 1 : India's manufacturing activity gained further momentum in July, rising to a 16-month high of 59.1 from 58.4 in June, driven by stronger growth in new orders, output, and inventory buildup, according to the data of HSBC India Manufacturing Purchasing Managers' Index (PMI).
The rating agency said that firms bought extra inputs to broadly the same extent as in June, however, whilst job creation receded to the weakest since November 2024.
Meanwhile, business confidence retreated to its lowest level in three years.
"Rising from 58.4 in June to 59.1 in July, the seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI®) - a single-figure indicator of sector performance - signalled the strongest improvement in the health of the sector since March 2024," firm said.
According to the HSBC PMI report, the growth in new orders was the sharpest in nearly five years, driven by robust domestic demand and successful marketing efforts.
This surge in demand led to a 15-month high in production output, with intermediate goods producers seeing the strongest acceleration, even as other segments experienced slower growth.
The report, however, highlighted that the cost pressures have intensified during the month, though they remained modest by historical standards.
On the pricing front, the increase in selling prices was higher than the long-run average, indicating that firms passed on some of the input cost pressures to customers.
While international demand also contributed to the overall increase in sales, export orders grew at a slower pace compared to June, though the growth remained one of the strongest in over 14 years.
The report added that companies continued to hire extra staff at the start of the second fiscal quarter, but they did so to the least extent in eight months.
Despite this strong performance, some concerns emerged. Job creation weakened, with July recording the slowest pace of employment growth since November 2024.
"Among the main headwinds to growth, survey members listed competition and inflation concerns," the report added.
On the purchasing side, the report added that the manufacturers increased input buying to rebuild inventories.
Although the pace of buying was slightly slower than in June, it was still the second-fastest in the past 15 months.
Improved supplier performance also helped boost stocks of purchases, which grew at their strongest rate in 15 months.
However, finished goods inventories continued to decline in July, as companies met demand by selling from existing stock.