India's July manufacturing PMI slips to five‑year low of 53.5

India's manufacturing PMI fell to 53.5 in July, the weakest level in five years. The index slipped from 54.2 in June, matching the long‑run average of 54.2 but still below it. The drop reflects a slower rise in new orders, which recorded the second‑weakest growth in over four years. Companies also reported weaker job creation for the third month running, marking the slowest hiring pace in a 29‑month stretch of continuous growth. Despite these headwinds, supply‑chain conditions improved as input lead times shortened at near‑record speed. HSBC Chief India Economist Pranjul Bhandari said the faster delivery times show supply‑chain delays are easing, though fresh tensions in the Middle East raise new concerns. He added that manufacturers are rebuilding buffers, with inventories of inputs and finished goods rising alongside higher purchasing volumes. Output and new export orders grew, driven by stronger overseas demand from countries such as Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand and the UAE. Input‑cost inflation eased to its weakest in five months, yet firms passed higher costs onto customers, with output price inflation picking up. Transportation costs remained above average, while overall selling prices rose only modestly, similar to June. Business sentiment improved from June's low, with firms optimistic about demand, infrastructure projects and new client enquiries, and many expecting marketing efforts to bear fruit.

Context

The PMI is a widely watched barometer of manufacturing health; a reading above 50 signals expansion, while below 50 indicates contraction. A dip to 53.5 suggests the sector is still growing but at a slower pace, highlighting the impact of weaker orders and cautious hiring amid global uncertainties.