Manufacturing rebound sustains in May: S&P Global PMI

Indian manufacturers secured new orders in May at virtually the same pace as April despite raising prices at the fastest rate in more than eight-and-a-half years amid an acute surge in input costs, as per the S&P Global India Manufacturing Purchasing Managers’ Index (PMI).

The index stood at 54.6 in May, down marginally from 57.4 in March. A reading of over 50 on the index indicates growth in activity levels. May marks the 11th month in a row that India’s manufacturing PMI reflects expansion in activity.

Input costs rose for the 22nd successive month in May, with companies reporting higher prices for electronic components, energy, freight, foodstuff, metals and textiles. Firms signalled more price hikes are on the way to cope with these costs, though they resorted to the fastest pace of increase for output prices since October 2013.

New export orders for Indian producers, which had dipped in March after eight months of growth, rebounded strongly in May to record the best expansion rate since April 2011.

Manufacturing sector jobs grew for the second month in a row, owing to ongoing improvements in sales and although the pace of job creation was ‘only slight’, it was still the strongest recorded since January 2020, S&P Global said.

Despite the broader buoyancy reflected by the index, business sentiment was dampened by inflation concerns in May, with the overall level of confidence the second-lowest in just over two years. Just about 9% of the firms surveyed for the PMI, forecast output growth over the next 12 months while 88% foresee no change from present levels.

“India’s manufacturing sector sustained strong growth momentum in May, as total new orders expanded further, thanks partly to the sharpest rise in international sales for eleven years,” remarked Pollyanna De Lima, economics associate director at S&P Global, noting the firms hired extra workers and rebuilt input stocks in view of resilient demand.

“While firms appear to be focusing on the now, the survey’s gauge of business optimism shows a sense of unease among manufacturers. The overall level of sentiment was the second-lowest seen for two years, with panellists generally expecting growth prospects to be harmed by acute price pressures,” she added.

The S&P Global India Manufacturing PMI is based on responses from purchasing managers in a panel of around 400 manufacturers across different sectors.