Manufacturing Activity Rose To 3-Months High, Says PMI Data

Manufacturing activity saw sharp growth in July 2021 which grew at its fastest pace in three months, thus reversing the contraction seen in June 2021

Manufacturing Activity Rose To 3-Months High, Says PMI Data

Manufacturing activity grew rapidly in July 2021 in India

Manufacturing activity witnessed sharp growth in July 2021 which grew at its fastest pace in three months, thus reversing the contraction seen in June 2021. The growth was mainly propelled by states relaxing their Covid-induced lockdowns, which led to slight growth in employment.

The Nikkei Manufacturing purchasing managers' index (PMI) rose to 55.3 in July 2021 from 48.1 in the previous month. The PMI for manufacturing had shrunk for the first time in 11 months in June.

The sharp growth in manufacturing elicited a reaction from Finance Minister Nirmala Sitharaman, who tweeted on Tuesday that “after slipping into contraction for the first time in 11 months…PMI…in July at 55.3, pointing to the strongest rate of growth in three months…June was 48.1. Operating conditions… improved during July, after growth was halted by…the pandemic in June”.

Output, new orders, exports, quantity of purchases and input stocks expanded in July, while a marginal increase in employment ended a 15-month sequence of job shedding.

“Strengthening international demand contributed to the uptick in total order books. New export orders expanded markedly in July, following a moderate contraction in June,” IHS Markit, which releases the PMI data, said in a statement.

“Output charges rose only slightly, however, as several companies absorbed additional cost burdens amid efforts to boost sales,” it said.

Goods producers saw a rise in their stocks of purchases during July, which followed a decline in June. Once again, raw material scarcity was cited as a key factor causing longer delivery times among suppliers.

“Output rose at a robust pace, with over one-third of companies noting a monthly expansion in production, amid a rebound in new business and the easing of some local Covid-19 restrictions. Should the pandemic continue to recede, we expect a 9.7% annual increase in industrial production for calendar year 2021,” Pollyanna De Lima, Associate Director at IHS Markit said.

She however cautioned that though employment rose marginally in July 2021, it would be too early to say whether the trend will sustain itself.