India’s May manufacturing PMI rises to 31-month high

India’s manufacturing sector activity continued to expand in May, with the S&P Global Purchasing Managers’ Index (PMI) coming in at a 31-month high of 58.7, up from 57.2 in April, data released on June 1 shows.

The manufacturing index has now spent 22 consecutive months above the key level of 50. A reading above 50 indicates expansion in activity, while a sub-50 print is a sign of contraction.

“India’s manufacturing PMI showcased encouraging developments in May, painting a notably positive picture for the sector. Demand conditions demonstrated remarkable strength, with factory orders rising at the fastest pace since January 2021,” S&P Global said in a statement.

“This surge in sales paved the way for stronger increases in production, employment and quantities of purchases. With supply-chain conditions improving further, companies noted a record accumulation in input inventories.”

With exports boosting total new orders in May, companies registered the quickest expansion in international sales for six months, the agency said.

Manufacturers scaled up production amid growing new orders and favourable market conditions. The increase in output was the fastest in 28 months, S&P Global said.

New business exerted pressure on the capacity of goods producers, while the rate of backlog accumulation was the quickest in seven months.

Capacity pressures supported job creation, with the rate of employment growth rising to a six-month high, it added.

Average cost burdens rose at a moderate rate, well below the long-run average, while selling prices rose at a quicker rate in May. The rate of inflation accelerated to a one-year high amid sustained increases in input costs and a supportive demand environment, the agency said.

“While improvements in supply chains and generally subdued global demand for inputs helped curb input price inflation in May, heightened demand and previously absorbed cost burdens translated into a stronger upward revision to selling charges,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.

“Demand-driven inflation is not inherently negative, but could erode purchasing power, create challenges for the economy and open the door for more interest rate hikes.”

Finally, business confidence in growth prospects improved
to a five-month high in May.