The country’s manufacturing sector activity reached a three-month high in May on the back of strong demand, basic infrastructure projects and new business. However, inflationary pressure remained. The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index stood at 55.0 in May, up from 54.7 in April. This marks the strongest improvement in the sector’s situation in the last three months. In the language of Purchasing Managers Index (PMI), a number above 50 indicates expansion while a number below 50 indicates contraction. Product manufacturing companies recorded the fastest growth in new orders and production since February. The main reasons behind this were strength in demand, infrastructure projects and new businesses.
Domestic market gave impetus to growth
HSBC Chief Economist Pranjul Bhandari (India) said that due to the unresolved conflict in West Asia, there are indications of increasing storage as a precautionary measure. Production growth accelerated while purchasing activity and finished goods inventories also picked up. The data showed that the domestic market drove growth, while the growth in export orders remained relatively slow. On the pricing front, the impact of the West Asia conflict remained on costs where expenditure on energy, fuel, raw materials and transportation increased. He said that the increase in the cost of raw materials slowed down slightly but the increase in production prices slowed down further, which may put pressure on the profits of manufacturers.
Increase in employment also
Despite high costs, companies bought more raw materials in May and the purchase level remained at a three-month high. The main reason behind this was the efforts to increase the reserves. Due to increasing production needs, employment generation in the manufacturing sector also continued, although its pace was slightly slower than in April. Business confidence remained positive, with companies expecting cost pressures to ease by the end of the year. Advertising and strong order book also supported optimism about future growth. The HSBC India Manufacturing PMI has been prepared by S&P Global on the basis of responses to questionnaires sent to purchasing managers in a group of about 400 companies.
