India's Manufacturing PMI stays little changed at 54.6 in May

New Delhi, June 1, 2022

The S&P Global India Manufacturing Purchasing Managers' Index (PMI) was, at 54.6 in May, little changed from 54.7 in April, pointing to a sustained recovery across the sector.

"The above-50.0 reading was the eleventh in as many months and consistent with a solid improvement in operating conditions," a press release from S&P Global said.

The release said demand showed signs of resilience in May, improving further in spite of another uptick in selling prices. Companies reported a marked increase in total new orders that was broadly similar to April.

May data also highlighted a notable uptick in growth of new export orders. The rate of expansion was sharp and the fastest since April 2011.

The PMI is a seasonally adjusted composite single-figure indicator of manufacturing performance in the country. It is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 industrial companies. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.

Amid reports of new business gains, sustained improvements in demand and looser COVID-19 restrictions, manufacturers continued to scale up production in May. The rate of growth was marked, above trend and broadly in line with that recorded in April, the release said.

According to the release, manufacturing sector growth in India steadied in May, with new orders and production increasing at similar rates to those registered in April.

Companies 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.

Total sales were boosted by a substantial upturn in international orders, the strongest in over 11 years.

"Indian manufacturers signalled a further increase in output prices halfway through the first quarter of fiscal year 2022-23. Having accelerated to the fastest in over eight-anda-half years, the rate of inflation was marked.

"According to panellists, additional cost burdens were shared with clients. Input costs rose for the twenty-second successive month in May, with companies reporting higher prices for electronic components, energy, freight, foodstuff, metals and textiles," the release said.

The release said tha, although softer than in April, the rate of inflation remained historically elevated. Goods producers stepped up input purchasing in May, thereby stretching the current sequence of expansion to 11 months. Moreover, the rate of growth was sharp and the quickest since last November. Where an increase was signalled, survey participants cited ongoing sales growth and rising production requirements.

Although some firms indicated a further lengthening of supplier delivery times in May, the vast majority of companies reported no change in vendor performance from April. As a result, there was only a marginal increase in lead times. Indeed, firms signalled an upturn in pre-production inventories. The accumulation was the eleventh in as many months and marked overall.

In contrast, holdings of finished products decreased further in May. The latest fall was only marginal, however, and the slowest in the current 58-month sequence of depletion.

"Manufacturing sector jobs rose further in May, owing to ongoing improvements in sales. Although only slight, the rate of employment growth picked up to the strongest since January 2020. Capacity pressures among goods producers remained only mild in May, as signalled by a marginal increase in outstanding business volumes. The rate of accumulation was broadly similar to those seen in the current five-month period of expansion.

"Business sentiment was dampened by inflation concerns in May, with the overall level of confidence the second-lowest in just over two years. While around 9% of panellists forecast output growth over the coming 12 months, 88% foresee no change from present levels," the release said.

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said: “India's manufacturing sector sustained strong growth momentum in May. Thanks in part to the sharpest rise in international sales for eleven years, total new orders expanded further. In response to demand resilience, companies continued with their efforts to rebuild stocks and hired extra workers accordingly.

“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 panellists generally expecting growth prospects to be harmed by acute price pressures.

"There was little-movement in the rate of input price inflation during May, which remains historically high, but output charge inflation surged to its highest in over eight-and-a-half years as companies continued to transfer additional cost burdens to their clients."

NNN