Manufacturing activity steady in May despite high inflation
NEW DELHI: India’s manufacturing activity grew at a higherthan-expected clip but remained flat in May compared with the previous month, even as other major exporting economies saw a decline. Factory orders continued to rise in India despite sellers passing on additional costs to buyers. The selling price rose to its highest in more than eightand-a-half years as cost increases were passed on to clients, in turn impacting overall business sentiment.
The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) came in at 54.6 points in May compared with 54.7 points in April, but remained steady as sales increased because of a sharp rise in international orders, the strongest in more than 11 years.
The 50-point mark separates expansion from contraction in PMI, a monthly indicator of factory activity. Released separately, S&P Global’s final manufacturing PMI, the first to be released among major exporting economies, is considered a bellwether for global trade.
The survey-based India report said demand improved despite another uptick in selling price, but businesses were wary of the momentum continuing because of inflationary pressures.
“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 secondlowest seen for two years, with panellists generally expecting growth prospects to be harmed by acute price pressures,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
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 rate of inflation remained historically elevated, though it was softer than in April.
Demand remained resilient, encouraging companies to continue with their efforts to rebuild stocks and hire more workers. Factory jobs rose further in May and the rate of employment picked up to the strongest since January 2020. Producers stepped up input buying in May, taking the current sequence of expansion to 11 months. The government last week announced several measures to cool inflation, including a sharp cut in the excise duty on petrol by ₹8 per litre and on diesel by ₹6 per litre.