According to the S&P Global India Manufacturing Purchasing Managers’ Index, Indian manufacturers obtained new orders at nearly the same rate as in April, despite raising prices at the fastest rate in more than eight and a half years due to a sharp rise in input costs (PMI).
In May, the index was 54.6, down slightly from 57.4 in March. A value of more than 50 on the index suggests that activity levels are increasing. For the 11th month in a row, India’s manufacturing PMI has seen an increase in inactivity.
Input costs increased for the 22nd month in a row
In May, input costs increased for the 22nd month in a row, with higher prices for electronic components, energy, freight, food, metals, and textiles reported by businesses. To deal with these costs, businesses have indicated that additional price hikes are in the coming, but they have resorted to the highest rate of increase in production prices since October 2013.
Following a fall in March after eight months of growth, new export orders for Indian exporters rebounded sharply in May to reach their highest level since April 2011.
Jobs in Manufacturing Sector increased
Jobs in the manufacturing sector increased for the second month in a row, thanks to continued sales growth, and while the rate of job creation was ‘very small,’ it was the fastest since January 2020, according to S&P Global.
Despite the index’s overall optimism, inflation fears affected corporate morale in May, resulting in the second-lowest level of confidence in just over two years. Only approximately 9% of the firms polled for the PMI expect output to expand over the next 12 months, while 88% expect no change from current levels.
“India’s manufacturing sector maintained strong growth momentum in May, as total new orders increased even more, thanks in part to the sharpest increase in international sales in eleven years,” said Pollyanna De Lima, economics associate director at S&P Global, noting that firms hired more workers and rebuilt input stocks in anticipation of resilient demand.
“While businesses appear to be focused on the here and now, the survey’s measure of business optimism reveals a sense of anxiety among manufacturers.” “Overall, mood was at its lowest level in two years, with panellists largely expecting acute pricing pressures to damage GDP expectations,” she added.