Manufacturing Sector Activity Drops to 3-month Low in May
As per the survey, the PMI fell from 58.2 in April to 57.6 in May, highlighting the weakest improvement in operating conditions since February
New Delhi: India’s manufacturing sector activity dropped to a three-month low in May as growth in new orders and output softened. The month, however, saw the first decline in the HSBC India manufacturing purchasing managers’ index or PMI since US President Donald Trump imposed reciprocal tariffs on April 2. The decline in manufacturing activity has also been attributed mostly to price pressures and India-Pakistan conflict that hampered growth in new orders, a private survey said on Monday.
As per the survey, the PMI fell from 58.2 in April to 57.6 in May, highlighting the weakest improvement in operating conditions since February. In PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction. However, the May data indicated another robust improvement in business conditions across India’s manufacturing industry, but rates of expansion receded to their weakest in three months.
“India’s May manufacturing PMI signalled another month of robust growth in the sector, although the rate of expansion in output and new orders eased from the previous month. The acceleration in employment growth to a new peak is certainly a positive development,” said Pranjul Bhandari, chief India economist at HSBC.
On the jobs front, the survey showed that firms hired additional staff in May, with the rate of job creation climbing to a new series record. Among the 12 per cent of panellists that reported higher headcounts, the creation of permanent job roles featured more prominently than that of short-term positions. “Moreover, sustained job creation enabled manufacturers to stay on top of their workloads in May,” the survey said.
On the price pressure, the survey highlighted that due to greater material costs, manufacturers also reported greater outlays on freight and labour. “As a result of rising operating expenses and supported by strong demand, firms increased their selling prices in May. Input cost inflation is picking up, but manufacturers seem to be able to lessen the pressure on profit margins by raising output prices,” Bhandari, added.
The survey further said that on the business outlook, Indian manufacturers remained strongly confident of a rise in output over the course of the coming 12 months. “Meanwhile, new export orders rose at one of the strongest rates recorded in three years. Panel members remarked on favourable demand from Asia, Europe, the Middle East and the US,” the survey added.