New Delhi: India's manufacturing activity slowed slightly in May, with the HSBC India Manufacturing Purchasing Managers' Index (PMI) falling to 57.6 from 58.2 in April, according to the HSBC PMI data released by S&P Global on Monday.
This marked the weakest improvement in operating conditions since February. However, the headline figure remained well above the neutral 50.0 mark, which separates expansion from contraction, and higher than the long-term average of 54.1.
The data showed that while there was still a strong improvement in business conditions, the pace of growth in new orders and output slowed to a three-month low. HSBC report said "Rates of increase in new orders and output retreated to three-month lows, they remained well above their respective long-run averages." Despite this, both remained well above their long-run trends, supported by healthy domestic and international demand. Companies also credited successful marketing efforts for the continued rise in sales. However, some manufacturers said that growth was impacted by strong competition, rising costs, and the ongoing India-Pakistan conflict.
New export orders rose at one of the fastest rates in three years. Firms reported strong demand from regions including Asia, Europe, the Middle East, and the US. This growth encouraged companies to increase input buying and expand their workforce. In fact, the rate of job creation in May reached a new series record, as more firms hired additional staff to meet demand. The data report also noted that Cost pressures intensified during the month. Companies reported higher prices for materials such as aluminium, cement, iron, leather, rubber, and sand. They also faced rising freight and labour costs.
This led to an increase in selling prices, which rose at one of the sharpest rates in around 11-and-a-half years. The rate of charge inflation remained above its long-run average.
Despite these cost pressures, supply chain conditions improved. Average delivery times shortened to the greatest extent in four months. As a result, companies increased their stocks of purchases, with the pace of accumulation being the second-fastest since August 2024.
However, inventories of finished goods fell for the sixth consecutive month, although the rate of decline was the slowest since February.
Looking ahead, Indian manufacturers remained confident about future growth. Many expect higher output in the next 12 months.
HSBC said "Among the main opportunities to growth, they remarked on advertising and new customer enquiries".
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