India manufacturing activity rose in May despite cost pressures, PMI shows

BENGALURU: India’s manufacturing sector expanded at its fastest pace in three months in May on sustained demand even as cost pressures were among the most intense in nearly four years and business optimism softened to its lowest since February, a survey showed on Monday.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 55.0 in May from April’s 54.7, higher than a preliminary estimate of 54.3

A reading above 50.0 indicates growth.

New orders - a key gauge of demand - grew at the fastestrate since February, driven by civil engineering projects, competitive pricing and favourable demand conditions.

Domestic demand was the primary engine of growth, as export orders, while still expanding solidly, increased at their slowest pace in three months.

Factory output rose at its quickest pace in three months with intermediate and capital goods leading the way. But consumer goods makers saw growth ease.

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Hiring continued although the pace of job creation slowed from April.

Input price inflation was the second-strongest, excluding April, in roughly four years - driven by higher outlays for energy, fuel, materials and transportation, with the Middle East war cited as a contributing factor. Capital goods producers faced the sharpest cost increases among the three sub-sectors tracked.

Selling price inflation eased from April and remained below the rate of input cost growth as competitive pressures restrained firms from passing on the full burden to customers.

Despite elevated costs manufacturers sharply increased purchasing activity - at the fastest rate in three months - partly to build contingency stocks.

Business confidence fell to the lowest since February but remained positive with companies expressing hope that cost pressures would ease, supported by strong order pipelines and marketing efforts.