India’s factory activity hits three-month high in May despite rising cost pressures, PMI shows – Firstpost

India’s manufacturing sector expanded at its fastest pace in three months in May, supported by strong demand and higher production, even as factories faced some of the sharpest cost pressures in nearly four years, a private survey showed on Monday.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, climbed to 55.0 in May from 54.7 in April, beating the preliminary estimate of 54.3. A reading above 50 indicates expansion, while below 50 signals contraction.

The improvement was driven by robust domestic demand, with new orders rising at their fastest pace since February. Survey participants cited civil engineering projects, competitive pricing and favourable market conditions as key factors behind the growth.

Factory output also increased at the quickest rate in three months, led by intermediate and capital goods segments. However, growth among consumer goods manufacturers moderated during the month.

Export demand remained healthy but lost some momentum, with new export orders expanding at the slowest pace in three months. Hiring continued across the sector, although the pace of job creation eased compared with April.

Manufacturers continued to battle rising expenses, with input cost inflation reaching its second-highest level in nearly four years, behind only April’s reading. Higher energy, fuel, raw material and transportation costs weighed on companies, with geopolitical tensions in the Middle East adding to the pressure.

Capital goods producers reported the steepest increase in costs among the surveyed segments. However, firms absorbed part of the impact as intense competition limited their ability to fully pass higher expenses on to customers.

Despite inflation concerns, manufacturers increased their purchasing activity at the fastest pace in three months, partly to build contingency stocks amid uncertainty.
Business confidence slipped to its lowest level since February but remained positive, with companies expecting strong order pipelines, marketing efforts and easing cost pressures to support future growth.