India’s manufacturing PMI increased to 55.0 in May, surpassing April’s 54.7 and the initial figure of 54.3. This rise was driven by faster growth in buying levels, new orders, and output, leading to increased stockpiling. The latest data indicates stronger growth in India’s manufacturing sector compared to earlier estimates.
Purchasing prices saw the second-highest increase since April 2022, while output charge inflation remained below the average of the past year. The final PMI reading reflects the sector’s best performance in three months, indicating possible precautionary stockpiling due to unresolved conflicts in the Middle East.
According to Pranjul Bhandari, Chief India Economist at HSBC, the acceleration in output growth, purchasing activity, and finished goods stocks suggests another month of potential stockpiling. Domestic demand primarily drove new order growth, while export order growth slowed. Input cost inflation slightly eased, but output price inflation decreased more significantly, hinting at a likely margin squeeze for manufacturers.
The latest PMI data reveals that goods producers experienced the fastest growth in new orders and output since February, particularly in intermediate and capital goods categories. Survey participants attributed this upturn to robust demand, infrastructure projects, and new business acquisitions. The domestic market played a crucial role in driving growth, with new export orders increasing at a slower pace. Despite this, international sales expanded solidly, with gains reported from Asia, Europe, Kenya, Nigeria, and the Middle East.
Cost pressures persisted due to the ongoing conflict in the Middle East, leading to increased expenses on energy, fuel, materials, and transportation. The data highlights a significant rise in input prices, the strongest seen in the past 45 months, particularly in April.
