India July manufacturing PMI off 4-mth peak - survey

MUMBAI (Reuters) - Indian manufacturing expansion cooled slightly in July as a global slowdown ate into export demand but output prices rose at their fastest pace in more than two years as producers passed on raw material costs, a survey showed.

The data comes three days after the Reserve Bank of India raised its main lending rate to its highest in seven years to quell double-digit inflation and signals manufacturing activity, while robust, has slowed slightly from December's 33-month peak.

The ABN AMRO Bank purchasing managers' index (PMI), released on Friday, was a seasonally adjusted 57.8 in July, moderating from a four-month peak of 58.6 in June.

A reading above 50 signals expansion while a figure below 50 suggests contraction.

The PMI, compiled by UK-based Markit Group Ltd and sponsored by the Dutch Bank, tracks changes in manufacturing business conditions by polling 500 companies each month on output, new orders, employment and prices.

The survey showed the output price index rose for the fourth consecutive month and at 56.6 was the highest since May 2006.

It said producers had passed on higher input prices, particularly of fuel and metals, due to strong demand.

Input prices rose for the fifth consecutive month to 59.2, the highest reading in 22 months.

"The most worrying sign from a macro-economic perspective is that inflationary pressures are getting more entrenched," said Gaurav Kapur, senior economist at ABN AMRO Bank.