India's manufacturing PMI hits 31-month high in May; reaches 58.7 vs 57.2 in April

India's manufacturing sector activity continued on a positive trend in May with the S&P Global Purchasing Managers' index (PMI) for the month at a 31-month high of 58.7 against 57.2 in April, revealed data released on Thursday. The PMI for the 22nd consecutive month continued to be above the 50-mark separating growth from contraction.

S&P Global in a statement said, "India's manufacturing PMI showcased encouraging developments in May, painting a notably positive picture for the sector. Demand conditions demonstrated remarkable strength, with factory orders rising at the fastest pace since January 2021."

"This surge in sales paved the way for stronger increases in production, employment and quantities of purchases. With supply-chain conditions improving further, companies noted a record accumulation in input inventories," it further added.

Increase in production

With the growing new orders and favourable market conditions manufacturers scaled up production. According to S&P Global the increase in output was the fastest in the last 28 months while foreign demand grew fastest in six months.

Generate employment

The report also indicated that the sector had generated more employment opportunities in the last month.

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said, “While improvements in supply chains and generally subdued global demand for inputs helped curb input price inflation in May, heightened demand and previously absorbed cost burdens translated into a stronger upward revision to selling charges."

De Lim added, “Demand-driven inflation is not inherently negative, but could erode purchasing power, create challenges for the economy and open the door for more interest rate hikes."