Manufacturing growth declines to 3-month low

India’s manufacturing sector growth fell to a three-month low in May, restricted by inflationary pressures, softer demand and heightened geopolitical conditions, a monthly survey said on Monday.

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The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) fell from 58.2 in April to 57.6 in May, highlighting the weakest improvement in operating conditions since February. In PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

May data indicated another robust improvement in business conditions across India’s manufacturing industry, but rates of expansion receded to their weakest in three months, the survey said.

Monitored companies linked growth to healthy domestic and international demand, alongside successful marketing initiatives. However, the upturn was curbed by cost pressures, fierce competition and the India-Pakistan conflict, according to panellists.

“India’s May manufacturing PMI signalled another month of robust growth in the sector, although the rate of expansion in output and new orders eased from the previous month. The acceleration in employment growth to a new peak is certainly a positive development,” Pranjul Bhandari, Chief India Economist at HSBC, said.

On the jobs front, firms hired additional staff in May, with the rate of job creation climbing to a new series record. Among the 12 per cent of panellists that reported higher headcounts, the creation of permanent job roles featured more prominently than that of short-term positions.

Moreover, sustained job creation enabled manufacturers to stay on top of their workloads in May, the survey said.

On the price front, in addition to greater material costs, manufacturers also reported greater outlays on freight and labour. As a result of rising operating expenses and supported by strong demand, firms increased their selling prices in May.