India's Manufacturing PMI In May Eases To 57.5 As Heatwave Impacts Output Levels

This figure represented an easing of growth and momentum as the survey found that the firms reduced their working hours amidst a severe heatwave, in turn impacting production

Manufacturing PMI: India’s manufacturing sector reported robust growth in the first quarter of the current fiscal year so far, however, the expansion rate slowed down in May against the preceding month. The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) slipped from 58.8 in April to 57.5 in May.

This figure represented an easing of growth and momentum as the survey found that the firms reduced their working hours amidst a severe heatwave, in turn impacting production. New orders increased at a softer place, however, the survey found that international sales grew to the greatest extent seen in more than 13 years.

The May data indicated a ‘further upturn in Indian factory production, which stretched the current sequence of expansion to nearly three years’. Growth was backed by new business gains, a robust demand, and successful marketing tactics, the survey found. 

Sector Outlook And Job Generation

Sharing an outlook on the sector, the survey showed that Indian manufacturers exhibited peak optimistic about growth potential in about nine and a half years. This positivity was backed by advertising and innovation, in addition to expectations that economic and demand conditions would remain favourable. 

In terms of job creation, employment in the sector surged to one of the greatest extents seen since March 2005. “Jobs growth, parallel to rising material and freight costs, underpinned a quicker increase in input costs at goods producers,” the survey stated.

Economist's Comments

Elaborating on the findings, Maitreyi Das, Global Economist, HSBC, noted, “The manufacturing sector remained in expansionary territory in May, albeit the pace of expansion slowed, led by a softer rise in new orders and output. Panellists cited heatwaves as a reason for lower work hours in May, which may have affected production volumes. In contrast, new export orders rose at the fastest pace in over 13 years, with a broad-based demand across geography. On the price front, higher raw material and freight costs led to a rise in input prices. Manufacturers were only able to pass on a part of this increase to consumers, resulting in a squeeze in manufacturing margins. The positive news is that May recorded the highest level of positive sentiment among manufacturing firms in just under a decade, resulting in increased job creation.”

The HSBC India Manufacturing PMI is compiled by S&P Global based on responses to questionnaires shared with purchasing managers in a panel of nearly 400 manufacturers.