India’s manufacturing sector continued to expand in May, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) rising to 55.0 from 54.7 in April, supported by stronger growth in output, new orders and purchasing activity.
The latest reading also surpassed the flash estimate of 54.3 and signalled the strongest improvement in the health of the manufacturing sector in three months.
According to the HSBC India Manufacturing PMI survey released on Monday, faster increases in buying activity, new business and production contributed to the stronger performance. Manufacturers also increased stockpiling efforts, reflecting efforts to build inventories amid ongoing global uncertainties.
Pranjul Bhandari, Chief India Economist at HSBC, said the final manufacturing PMI pointed to another month of possible precautionary stockpiling as the conflict in the Middle East remains unresolved.
“Output growth accelerated, while purchasing activity and stocks of finished goods rose at a faster pace. New order growth was driven by domestic demand, while export order growth moderated,” she said.
The survey showed that both output and new orders expanded at their fastest pace since February. Growth was particularly strong in the intermediate and capital goods segments, while consumer goods manufacturers reported a comparatively slower pace of expansion.
Manufacturers attributed the increase in business activity to robust domestic demand, ongoing infrastructure projects and gains from new customers.
While domestic demand remained the key driver of growth, export orders also continued to expand, albeit at a slower pace. Survey respondents reported stronger demand from markets across Asia, Europe, Kenya, Nigeria and the Middle East.
The report also highlighted persistent cost pressures facing manufacturers. Input prices remained elevated due to higher spending on energy, fuel, raw materials and transportation. Although input cost inflation eased slightly compared to April, it remained among the highest levels recorded over the past three years.
At the same time, output price inflation slowed more noticeably, indicating that manufacturers may be facing pressure on profit margins as they absorb part of the increase in production costs.
The PMI is a key indicator of manufacturing activity, with a reading above 50 indicating expansion and a figure below 50 signalling contraction.
-IANS
