Manufacturing activity eases to a three-month low of 57.5 in May

Heatwaves and rising production costs led to manufacturing activity easing further to a three-month low of 57.5 in May compared with 58.8 in the previous month, according to a private survey released Monday.

“The pace of expansion slowed, led by a softer rise in new orders and output. Panellists cited heatwaves as a reason for lower work hours in May, which may have affected production volumes,” said Maitreyi Das, global economist, HSBC.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index remained four points higher than the long-run average, with exports helping drive momentum.


“Growth was supported by new business gains, demand strength and successful marketing efforts, anecdotal evidence showed,” the report highlighted.

New export orders rising to the highest level in 13 years also contributed to better job numbers.

“Manufacturing employment rose to one of the greatest extents seen since data collection started in March 2005, the report stated.

The job growth put pressure on prices as well, with rising material and freight costs contributing further, as the rate of input inflation rose to the joint-highest since August 2022.

The companies still demonstrated some pricing power, with charge inflation also quickening to an eight-month high in May as demand kept humming. But higher prices could add more pressure to margins, say experts.

“Input price PMI is now above output price PMI (after remaining below it since September 2023), suggesting a possible margin pressures for firms, if commodity prices (crude oil, metals) and freight costs rise further,” said Shreya Sodhani, regional economist, Barclays.

The slow growth in manufacturing had little impact on momentum as the business confidence rose to its highest level in nine-and-a-half years, fuelled by expectations that demand conditions will remain favourable.

“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 noted.

The Indian economy expanded 8.2% in FY24, according to data released last week, surpassing the 7.6% estimate by the government in February.