June factory activity eases, but confidence up

An easing of export orders and softening of inventory accumulation from May led to a moderation in seasonally adjusted manufacturing Purchasing Managers’ Index that fell to 57.8 in June from a 31-month high of 58.7 in May.

Though lower than the previous month, June marked the second fastest pace of expansion in manufacturing activity in six months.

The June PMI data pointed to an improvement in overall operating conditions for 24th straight month. A value of over 50 denotes expansion.


“Positive client interest continued to support the manufacturing industry, driving the growth of output, employment, quantities of purchases and input stocks,” said Pollyanna De Lima, economics associate director, S&P Global Market Intelligence.

De Lima said PMI results indicate strong domestic and international demand for Indian-made products.

The increase in new orders was the fastest since February 2021, owing to favourable demand conditions. The 400 respondents to the survey also indicated that advertising and new product releases were also a factor in rising new orders.

The continuing uptick in manufacturing activity also lifted growth prospects. The index has averaged 57.9 in the first quarter of FY24.

“These positive developments instilled greater confidence into manufacturers regarding growth prospects, boding well for business investment and the labour market,” De Lima said.

The overall business confidence was at a six-month high.

"The backlog of orders remained high, while inventories fell further, suggesting that manufacturing strength will remain supported," said Rahul Bajoria, MD, Barclays.

Suppliers could comfortably meet the rising demand for inputs. “This was signalled by another improvement in delivery times,” the S&P release stated, pointing out that vendor performance was at an 8.5-year high.

“Overall, the latest manufacturing PMI data indicate that manufacturing sentiment in India remains optimistic, underpinned by robust domestic demand. Latest hard data suggest industrial activity has maintained momentum,” Bajoria said.

Core output data released last week showed that growth in eight core industries, which form 40% of the index of industrial production, had remained unchanged at 4.3% in May, compared with the previous month.