India's manufacturing PMI® has painted a notably positive picture for the sector this May. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index® rose from 57.2 in April to 58.7 in May, indicating the strongest improvement in the health of the sector since October 2020.
(As per PMI, a reading above 50 indicates an increase while below 50 marks an overall decrease.)
Demand conditions have strengthened as factory orders rise at an unprecedented rate. This surge has resulted in increases in production, employment and quantities of purchases. There has been an acceleration in quantities of purchases, with the rate of expansion quickening to the strongest in over 12 years. According to survey members, ongoing increases in new business and efforts to replenish stocks underpinned growth of buying levels. Not only did factory orders increase for the twenty-third month running in May, but also to the greatest extent since January 2021.
Out of the five PMI sub-components, stocks of purchases showed notable vigour, increasing at an unparalled pace in May. Monitored companies indicated that better supply-chain conditions and sustained increases in input purchasing boosted inventory growth.
While, cost pressures have remained historically mild, demand strength facilitated an increase in output charges.
Companies registered the quickest expansion in international sales for six months. Pollyanna De Lima, Economics Associate Director, S&P Global Market Intelligence, said: "While the upturn in domestic orders strengthens the foundations of the economy, rising external business foster international partnerships and boost India's position in the global market."
May saw substantial improvement in operating conditions, stronger increase in new orders boosts, input buying growth Stocks of purchases rise at unprecedented pace
"Demand-driven inflation is not inherently negative, but could erode purchasing power, create challenges for the economy and open the door for more interest rate hikes," De Lima added.
Indian manufacturers scaled up production volumes as a result of growing new orders and favourable market conditions. The latest increase in output was sharp and the fastest in 28 months.
Rising inflows of new business exerted pressure on the capacity of goods producers, as seen by another uptick in outstanding business. The rate of backlog accumulation was slight, but the quickest in seven months.
In turn, capacity pressures supported job creation midway through the first fiscal quarter. Moreover, the rate of employment growth improved to a six-month high.
Good producers signalled an improvement in vendor performance during May. Average lead times on inputs shortened to the greatest extent in eight-and-a-half years. Smoother logistics aided a softer increase in input prices during May. Average cost burdens rose at a moderate rate that was well below its long-run average.
In contrast to the trend for input costs, selling prices rose at a solid and quicker rate in May. The rate of inflation accelerated to a one-year high. According to panellists, sustained increases in input costs and a supportive demand environment led them to lift their charges. Elsewhere, post-production inventories fell further, amid reports of orders being fulfilled from stocks. The pace of depletion was moderate and equal to April. Business confidence towards growth prospects improved to a five-month high in May. Publicity and demand resilience were among the reasons cited for upbeat forecasts.
