Manufacturing PMI steadies in May on increased orders despite inflation

PMI manufacturing was recorded at 54.6 in May, a minor change from 54.7 in April

India’s manufacturing sector growth steadied in May on the back of rising international orders despite an increase in prices. 

The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) was recorded at 54.6 in May, a minor change from 54.7 in April. New orders and production continued to rise at the pace registered in April.

A print above 50 indicates expansion, while a score below 50 suggests a contraction.

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“The above-50.0 reading was the eleventh in as many months and consistent with a solid improvement in operating conditions,” S&P Global said in a statement. 

Companies secured new work despite lifting selling prices at the fastest rate in over eight-and-a-half years as additional cost burdens continued to be transferred to clients, it said. Demand showed signs of resilience in May, improving further despite another uptick in selling prices.

"…with the sharpest rise in international sales for 11 years, total new orders expanded further. In response to demand resilience, companies continued with their efforts to rebuild stocks and hired extra workers accordingly,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence. 

Manufacturers continued to scale up production in May on sustained improvement in demand and looser COVID-19 restrictions; signaling a further increase in output prices. 

“There was little movement in the rate of input price inflation during May, which remains historically high, but output charge inflation surged to its highest in over eight-and-a-half years as companies continued to transfer additional cost burdens to their clients," said De Lima. 

Input costs continued to rise for a twenty-second consecutive month in May, with companies reporting higher prices for electronic components, energy, freight, foodstuff, metals, and textiles.

Goods producers stepped up input purchasing in May, in turn stretching the current sequence of expansion to 11 months. Sales growth and rising production requirements were the main reason for the increase. 

With improvement in sales, jobs in the manufacturing sector rose during the month, with the employment growth rate picking up the strongest since January 2020. 

Due to rising inflation, business sentiment was dampened with the overall level of confidence the second-lowest in just over two years. 

Around 9 per cent of the panelists forecast output growth over the next 12 months, while 88 per cent foresee no change from present levels, S&P Global said.