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Manufacturing PMI shows steady growth in May

Date Posted: 9 June, 2022

India’s manufacturing sector expanded in the month of May and ‘sustained strong growth’ despite historically high inflation, according to a survey. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) was at 54.6 in May, little-changed from 54.7 in April.

It said factory output was boosted by jump in international orders, which was the highest in over 11 years, since April 2011, the survey said. In response to demand resilience, manufacturers in India continued with their efforts to rebuild stocks and hired extra workers accordingly. Last month, the rate of employment growth picked up to the strongest since January 2020, the survey added.

“While firms appear to be focusing on the now, the survey’s gauge of business optimism shows a sense of unease among manufacturers. The overall level of sentiment was the second-lowest seen for two years, with panelists generally expecting growth prospects to be harmed by acute price pressures,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.

The findings of the survey come as India reported slow GDP growth of 4.1% in the January to March quarter. Economists expect growth to slow down this fiscal year due to spillovers from the Russia Ukraine war which is expected to put pressure on the supply chain and contribute to rising prices.

In May, manufacturers continued to pass on additional cost burdens to clients and increased selling prices at the fastest rate in over eight-and-a-half years. However, they were able to secure new work despite lifting selling prices at the fastest rate in over eight-and-a-half years as additional cost burdens continued to be transferred to clients.

Although softer than in April, the rate of inflation remained historically elevated in May. Companies reported higher prices for items such as electronic components, energy, freight, foodstuffs, metals, and textiles.

Amid reports of new business gains, sustained improvements in demand and looser COVID-19 restrictions, manufacturers continued to scale up production in May, according to the survey findings. Going ahead, the majority of panelists polled by the survey (ie 88 per cent) foresee no change in output growth from present levels, around 9 per cent of panelists forecast output growth over the coming 12 months.

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