Manufacturing Activities Hitting a Peak for Three Months Straight in May Due to Growing Demands

The Indian manufacturing industry showed better performance in May, with the HSBC India Manufacturing PMI by S&P Global moving up to 55.0 in May from 54.7 in April. This is also higher than the flash estimate of 54.3.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Any reading above 50 on the PMI indicates growth in business activities while any reading below 50 indicates contraction in business activities.

New Orders And Output Improve

Growth in new orders accelerated during May, helping lift overall manufacturing activity. Data from the HSBC India Manufacturing PMI showed that new business expanded at the fastest pace since February.

Domestic demand remained the main contributor to order growth. Export orders also increased, although the pace of expansion was slower than in the previous month.

Manufacturing output rose at its strongest rate in three months. Producers of capital and intermediate goods recorded stronger growth in production while manufacturers of consumer goods saw relatively slower expansion.

Firms Increase Purchasing Activity

Manufacturers stepped up purchases of raw materials during May to support higher production requirements.
According to PMI data compiled by S&P Global, purchasing activity expanded at the fastest pace in three months. Companies also increased inventory holdings during the month.

Finished goods inventories rose for the second consecutive month and registered the strongest increase in more than a decade. The build-up in stocks coincided with higher production activity across manufacturing units.

Cost Pressures Remain Elevated

Input cost pressures were again observed in May, as manufacturing firms cited higher cost pressures in relation to fuel, energy, transportation, and raw material prices.

According to the PMI data, inflation in terms of input prices stayed close to the highest readings in about four years. Of the industries monitored, capital goods producers saw the fastest-growing cost pressures.

Although production cost pressures stayed high, selling price rises slowed in May compared to those seen last month. Competition restricted manufacturers' ability to pass higher costs onto consumers.

Hiring Continues Despite Weaker Business Sentiment

During May, manufacturing firms continued adding workers although the pace was slower compared to that seen last month.

Sentiment among businesses in the manufacturing sector remained positive but dipped to its lowest point in seven months due to high order backlogs and ongoing demand.

PMI reading for May reflects the robust growth in manufacturing because production and orders grew despite rising costs in May.