Manufacturing PMI Eases To Three-Month Low On Heatwaves, Higher Production Costs

India's manufacturing activity continued to ease for the second straight month to a three-month low in May after hitting a 16-year high in March, but still remained above its long-term average, a private survey showed.

The HSBC India Manufacturing Purchasing Managers’ Index fell to 57.5 in May from 58.8 in April, signalling a slower but still substantial improvement in the health of the sector.

May data showed a further upturn in Indian factory production, which stretched the current sequence of expansion to nearly three years. Anecdotal evidence showed that new business gains, strong demand, and successful marketing efforts supported the growth. The release attributed the slowdown to reduced working hours amid intense heat and rising production costs.

Similarly, new orders rose at a substantial pace, albeit the slowest in three months. The increase was linked to marketing efforts, strong demand, and favorable economic conditions. Competition and election-related disruptions reportedly stymied growth.

In contrast to the trend for total sales, new export orders rose at a faster pace in May. The upturn was the strongest in over 13 years, and Indian manufacturers expressed the highest level of positive sentiment towards growth prospects in nearly nine and a-half years. Confidence was fueled by advertising and innovation, along with expectations that economic and demand conditions would remain favourable.

Ongoing strong sales performances combined with upbeat growth forecasts fueled job creation in May. Jobs growth, parallel to rising material and freight costs, underpinned a quicker increase in input costs at goods producers.

The overall rate of inflation remained below its long-run average, but it rose to its joint-highest since August 2022. In response to the latest increase in operating expenses, companies raised their own selling prices in May. The rate of change in inflation quickened to an eight-month high.