Manufacturing PMI in May hits 31-month high
India’s manufacturing activity, measured by the Purchasing Managers Index (PMI), reached a 31-month high in May, according to the data released by the S&P Global Market Intelligence on Thursday. The surge in PMI index is supported by strong demand conditions for Indian manufactured goods both globally and domestically according to S&P.
The seasonally adjusted manufacturing PMI rose from 57.2 in April to 58.7 in May, the highest value since October 2020. A PMI reading above 50 indicates an expansion in the manufacturing activity. PMI manufacturing has now stayed above the 50-mark for the 23rd consecutive month (since June 2021).
PMI is among a clutch of high frequency indicators (those released with a frequency higher than a quarter) that continues to point to an ongoing improvement in the Indian economy. This was also borne out in GDP data for the fourth quarter of 2022-23 and the full year, released on Wednesday.
GDP growth in the fourth quarter was 6.1%, far higher than the consensus estimate of analysts of around 5%; and that for the year, 7.2%.
“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,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence in a statement.
The PMI data shows that the new orders expanded at the fastest pace since January 2021, while international orders grew at the fastest pace in the past six months. This has also translated into additional job creation, with “the rate of employment growth improving to a sixmonth high”, the report noted.
“The record increase in input stocks shows a better preparedness of manufacturers in managing supply chains. This should allow firms to mitigate potential disruptions, maintain a steady flow of production and demonstrate the industry’s resilience in the face of challenges,” Lima added.
Even though input
cooled down in May, the inflation rate for selling prices accelerated to a one-year high. This suggests that the manufacturers were able to pass on the sustained increases in input costs from previous months to consumers at the back of supportive demand conditions.
Experts flagged growing concerns over the divergence between the high frequency PMI from the NSO surveys. “There is some divergence in hard data from soft, surveybased data though: Core infrastructure index growth for April was moderate at 3.5% year-onyear, with some sequential decline too. Other indicators of industrial activity such as electricity and fuel consumption are showing some easing, partly on account of high base effects,” Rahul Bajoria, MD & head of EM Asia (ex-China) Economics said in a note.