Factory output contracts for four months in a row in July; manufacturing PMI tumbles below June-level

The manufacturing PMI, which fell to a record low in the month of April, showed some recovery in May, and further in June 2020, but it once again rolled down in July.

The Indian manufacturing sector started to recover after it stepped out of the strict nationwide lockdown, however, it has once again lost balance. The manufacturing PMI, which fell to a record low in the month of April, showed some recovery in May, and further in June 2020, but it once again slipped in July. The manufacturing PMI stood at 46 in July, which was 47.2 in June 2020, and 30.8 in the month of May. Business conditions continued to deteriorate in July amid prolonged closures and the health of the manufacturing sector declined at a slightly quicker pace, said the IHS Markit report. Both output and new orders continue to fall markedly and business sentiment remained historically subdued despite improving, it added.

“Latest PMI data from Indian manufacturers shed more light on the state of economic conditions in one of the countries worst affected by the COVID-19 pandemic. The survey results showed a re-acceleration of declines in the key indices of output and new orders, undermining the trend towards stabilisation seen over the past two months,” said Eliot Kerr, Economist at IHS Markit. Anecdotal evidence indicated that firms were struggling to obtain work, with some of their clients remaining in lockdown, suggesting that we won’t see a pick-up in activity until infection rates are quelled and restrictions can be further removed, Eliot Kerr added.

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Meanwhile, despite the deteriorating operating conditions, manufacturers were increasingly optimistic regarding future activity. Sentiment towards the 12-month business outlook improved for the second month in a row to
reach a five-month high in the month of July 2020, according to the IHS Markit report. However, the curse of low production is still dominant on the employment front. Deteriorating demand conditions led Indian manufacturers to continue cutting staff numbers during July.