The S&P Global India manufacturing PMI hit a 31-month high of 58.7 in May. Image for representation purposes only. File | photo credit: Reuters
The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) hit a 31-month high of 58.7 in May as factory orders rose at the fastest pace since January 2021 and producers hoarded inputs at a unprecedented pace thanks to falling costs.
A reading of 50 on the index, which stood at 57.2 in April, indicates no change in activity levels. The latest reading reflects a substantial improvement in operating conditions with order books growing for the 23rd consecutive month, further bolstered by export deals recording the fastest rise in six months.
While the overall improvement in the health of the sector was the strongest since October 2020, production levels were the highest in 28 months and pressure on capacity forced companies to increase new hiring to a high of six month.
While input costs “remained historically low,” S&P Global said its survey of about 400 companies that forms the basis of the index, showed producers have been raising selling prices at “a solid pace. and faster in May”, which was the highest in a year. “According [survey] panelists, sustained increases in input costs and a favorable demand environment caused them to increase their charges,” the firm said.
Overall, business confidence levels about growth prospects continued to improve from an eight-month low in March to a five-month high in May, with businesses attributing their good mood to advertising and demand resilience.
Pollyanna De Lima, associate director of economics at S&P Global Market Intelligence, said the surge in sales captured in the PMI highlighted robust demand for Indian products at home and abroad, which also generated more job opportunities in May. Ms De Lima, however, added a caveat about the depletion of purchasing power due to inflation.
“While improvements in supply chains and generally subdued global demand for inputs helped dampen input price inflation in May, increased demand and previously absorbed cost loads translated into a stronger upward revision of selling expenses. Demand-driven inflation is not inherently negative, but could erode purchasing power, create challenges for the economy and open the door to further interest rate hikes,” she said. underline.
The record increase in input inventories shows that companies are better prepared to manage supply chains. This, Ms. De Lima noted, should enable companies to mitigate potential disruptions, maintain a smooth flow of production and be resilient in the face of challenges.