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HomeBusinessIndia's manufacturing sector growth eases in May; exports surge to 13-year high

India’s manufacturing sector growth eases in May; exports surge to 13-year high

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India’s manufacturing sector experienced slower growth for the second consecutive month in May but remained firmly in expansion mode, with global sales increasing to the greatest extent in over 13 years, according to a monthly Purchasing Managers’ Index (PMI) survey released on Monday (3).

The seasonally adjusted HSBC India Manufacturing PMI fell from 58.8 in April to 57.5 in May, indicating a slower but still substantial improvement in the sector’s health.

The index had previously climbed to a 16-year high of 59.1 in March. In PMI terms, a reading above 50 signifies expansion, while a score below 50 indicates contraction.

According to HSBC Global Economist Maitreyi Das, “The manufacturing sector remained in expansionary territory in May, albeit the pace slowed, led by a softer rise in new orders and output.”

The slowdown was attributed to reduced working hours amid an intensive heatwave and rising production costs. “Panelists cited heatwaves as a reason for lower work hours in May, which may have affected production volumes,” Das said.

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The headline figure was nearly four points higher than its long-run average. May data showed a further upturn in Indian factory production, extending the current sequence of expansion to nearly three years.

Despite easing to a three-month low, the rate of increase remained sharp. Growth was supported by new business gains, strong demand, and successful marketing efforts, the report said.

New orders rose at a substantial pace, though it was the slowest in three months. The rise was associated with marketing efforts, demand strength, and favorable economic conditions.

Growth was reportedly stymied by competition and election-related disruptions. However, in contrast to the trend for total sales, new export orders rose at a faster pace in May.

The upturn in international sales was the strongest in over 13 years, as manufacturers saw gains from customers across Africa, Asia, the Americas, Europe, and the Middle East.

The ongoing strong sales performance, combined with upbeat growth forecasts, fueled job creation in May. Manufacturing employment rose to one of the greatest extents seen since data collection started in March 2005.

Job growth, along with rising material and freight costs, led to a quicker increase in input costs for goods producers.

“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,” Das said.

“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,” Das added.

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

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