India manufacturing activity eases for 2nd straight month on moderation in output

India's manufacturing sector displayed resilience even as activity moderated in July for second straight month owing to moderation in output and new orders, data showed on Tuesday.

The Manufacturing Purchasing Managers' Index, compiled by S&P Global, dipped to 57.7 last month from June's 57.8. This marks over two years of the index being above the 50-mark, which separates expansion from contraction.

While new orders remained robust, output growth moderated to a three-month low. The rate of input cost inflation accelerated to a nine-month high in July. However, it remained softer than the series average. Where input prices increased, panellists reported higher costs for raw materials, in particular cotton, the report said.


"The ... sector has maintained its position as one of the star performers globally, bucking the trend of demand weakness seen in other parts of the world," noted Andrew Harker, economics director at S&P Global Market Intelligence.

"The Indian manufacturing sector showed little sign of losing growth momentum in July as production lines continued to motor on the back of strong new order growth."

Output has increased continuously on a monthly basis since July 2021. The latest rise was substantial, albeit the softest in three months, the survey showed.

Foreign demand stoked exports at the fastest pace since November. Firms expected activity to stay elevated over the coming year and the future output sub-index remained high at 65.3, albeit slightly lower than in June.

"Pressure continued to come on capacity, prompting firms to expand employment solidly again, a trend that is likely to continue in the months ahead should demand remain strong," added Harker.

Annual retail inflation rose to 4.81% in June - snapping four months of easing - and is expected to increase over coming months, pushing markets to anticipate the Reserve Bank of India will keep its key policy rate high for a longer period.

Meanwhile, data released Monday showed that the output of eight key infrastructure sectors expanded at a five-month high rate of 8.2 per cent in June on healthy performance by sectors such as natural gas and steel,