India's latest manufacturing output contracted at a quicker pace than in June but it improved for most countries in July. Amid prolonged closures, business conditions continued to deteriorate as the country's purchasing managers' index (PMI) for manufacturing went down to 46 in July from a smart recovery in June at 47.2.

"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. 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," said Eliot Kerr, economist at IHS Markit.

Manufacturing PMIs were in the expansionary zone (above 50) in most European economies while some of the Asian economies including Indonesia, Japan, South Korea registered sharp improvements over June'20, highlighted an Anand Rathi note. For a significant number of Asian economies, however, the index was in the contraction zone (below 50) which included Japan, Indonesia, South Korea, Vietnam and Philippines, it added.

India was not alone as the output faltered for a few other Asian countries in July. It included Vietnam where the index dipped back below the 50 mark after 51.1 in June, Philippines and Malaysia where it dropped from 49.7 to 48.4 and 50 from 51, respectively.

"The deterioration in India's manufacturing PMI in July'20 seems to be due to factors such as the continuing rise in pandemic cases, slowing bank credit growth and the lack of a substantial fiscal stimulus. While the supply situation is improving, after some pent-up buying, demand conditions seem to be deteriorating," the note added. This disarray in manufacturing bodes ill for real GDP and corporate earnings growth in Q2 FY21.