The S&P Global India manufacturing PMI survey indicates that conditions in the sector moderately weakened in June, with the headline index falling to 57.8 from 58.7 in May. Coming in slightly below market consensus and the first monthly decline in four months, the outturn nevertheless matches the second highest reading since October 2020.

Despite the headline decline, manufacturers registered a sharp increase in new orders, which rose at the strongest rate since February 2021. Export orders also rose at a solid pace, though at a slower one than in May. Companies ramped up production in June to meet the rising demand, with output rising sharply and at the fastest pace in 18 months. But post-producion stocks fell the quickest in six months, while input inventories rose at one of the fastest rate since data collection started in March 2005. Indian suppliers to the manufacturing sector were able to meet the increased demand for inputs comfortably, as delivery times improved and vendor performance strengthened to the greatest extent in more than eight years. Employment rose at a modest rate.

On the inflation front, while input costs were contained, there was a marked increase in output charge inflation, which, bolstered by strong demand dynamics and higher labor costs, rose to the highest level in 13 months.

The Manufacturing Purchasing Managers' Index (PMI) is a joint publication by Markit and the Nikkei media organisation and provides an estimate of manufacturing business activity for the preceding month. The report uses information obtained from a representative sector survey incorporating around 400 companies in eight broad categories. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting).

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic survey data such as the Markit PMIs, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.

The HSBC India Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 500 manufacturing companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on industry contribution to Indian GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the 'Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the 'diffusion' index. This index is the sum of the positive responses plus a half of those responding 'the same'.