India's manufacturing sector activity eases in June, but output remained in growth territory: PMI

India’s manufacturing activities in June expanded at the second-fastest pace this year, albeit at a slower pace when compared with the previous month, an industry survey conducted by S&P Global showed.

Purchasing Managers' Index (PMI) for manufacturing declined to 57.8 in June from 58.7 recorded in the previous month. PMI in May was the highest in 31 months.

Despite falling from 58.7 in May to 57.8, the headline figure pointed to a considerable improvement in operating conditions, S&P Global noted in the report.

A PMI score above 50 indicates growth in the sector while below 50 shows contraction. Manufacturing PMI has been above 50 mark for the past two years.

"June's PMI results again showed robust demand for Indian-made products, both in the domestic and international markets,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

Although the latest PMI data indicated contained input cost inflation, there was a marked increase in output charges. Positive demand dynamics and greater labour costs pushed charge inflation to a 13-month high.

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"Presented with buoyant demand, manufacturers seized the opportunity to adjust their pricing strategies,” De Lima said.

The latest increase in output charges reflected firms' ability to pass on higher cost burdens to customers while maintaining a competitive edge, she added.

According to the report, employment in June rose at a moderate pace that was broadly similar to May. Capacity pressures remained mild in June, with backlogs of work increasing for the eighteenth month in a row, but only slightly.

To meet rising sales, companies ramped up production in June. The expansion in output was sharp and among the fastest over the past year-and-a-half.

Additional inputs were purchased by Indian manufacturers at the end of the first fiscal quarter. The increase was substantial and the second-strongest in over 12 years. Positive demand trends and rising output needs were behind the latest expansion, anecdotal evidence showed.

Upturn in demand positively impacted several other measures such as sales, production, stock building and employment.

Indian goods producers registered a sharp increase in new work intakes during June, and one that was among the strongest seen since February 2021. In addition to favourable demand conditions, panellists linked the upturn to advertising and new product releases. Concurrently, new export orders rose solidly, though at a slower pace than in May, S&P Global noted in the report.