Factory activity steady in May as global orders rise

India's manufacturing sector growth steadied in May, as international orders increased at the fastest pace in more than 11 years despite higher selling prices and business sentiment being dampened by inflation concerns, a private survey showed on Wednesday.

The S&P Global India Manufacturing Purchasing Managers' Index (PMI) was at 54.6 in May, a tad lower than the previous month's reading of 54.7. New orders and production continued to rise at the pace registered in April.

A reading above 50 indicates expansion, while below it suggests contraction in activity.


"The above-50.0 reading was the eleventh in as many months and consistent with a solid improvement in operating conditions," S&P Global said in a statement, adding that it showed sustained recovery across the sector.

As per the survey report, the rate of expansion of new export orders was sharp and the fastest since April 2011.

Companies secured new work, despite selling prices increasing at the fastest rate in over eight-and-a-half years and they continue to transfer additional cost burdens to clients, as demand showed signs of resilience, it said.

"India's manufacturing sector sustained strong growth momentum in May," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

Manufacturers continued to scale up production in May on sustained improvement in demand and looser Covid-19 restrictions, signalling a further increase in output prices.

De Lima noted that there was little movement in the rate of input price inflation last month, which remained historically high, but output charge inflation surged to its highest in over eight-and-a-half years as companies continued to transfer additional cost burdens to their clients.

Input costs continued to rise for the 22nd consecutive month in May, with companies reporting higher prices for electronic components, energy, freight, foodstuff, metals and textiles.

Goods producers stepped up input purchasing in May, in turn stretching current sequence of expansion to 11 months. Sales growth and rising production requirements were the main reason for the increase, according to the report.