Manufacturing PMI at 31-mth high on restocking, rising biz

New Delhi: Easing supply chain bottlenecks and commodity prices helped boost manufacturing to a 31-month high in May, a private monthly survey indicated on Thursday, a day after the government cited a Q4 manufacturing rebound among factors behind a 7.2% economic growth rate in the last fiscal.

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) edged up from 57.2 in April to 58.7 in May, marking the 23rd straight month of gains. A figure of 50 separates expansion from contraction.

“May data indicated a sharp and accelerated increase in quantities of purchases, with the rate of expansion quickening to the strongest in over 12 years. According to survey members, ongoing increases in new business and efforts to replenish the stocks underpinned growth of buying levels,” the PMI report said.

The rise in factory orders was the highest since January 2021, it said, adding that firms generally associated the upturn with advertising, demand strength and a favourable economic climate.

Exports gave impetus to new orders, as companies registered the quickest expansion in international sales for six months. Business confidence towards growth prospects improved to a five-month high in May, with publicity and demand resilience among reasons cited for the upbeat forecast.

Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said: “PMI’s spotlight on soaring sales showcases the robust demand for Indian-made products both domestically and internationally. While the upturn in domestic orders strengthens the foundations of the economy, rising external business foster international partnerships and boost India’s position in the global markets.”

De Lima said that while improvements in supply chains and generally subdued global demand for inputs helped curb input price inflation in May, heightened demand and previously absorbed cost burdens translated into stronger upward revision to selling charges.

“Demand-driven inflation is not inherently negative, but could erode the purchasing power, create challenges for the economy and open the door for more interest rate hikes,” the report added.

Official data released on Wednesday showed that India’s economy grew at 7.2% in FY23, beating the 7% official forecast, led by robust growth in the agriculture, construction and services sectors, and a rebound in manufacturing in the March quarter.

The data showed that investment in fixed assets witnessed strong growth of 8.92% in the March quarter, driven by the central government’s capital expenditure, while household spending witnessed an uptick of 2.82%. Government spending, too, showed growth of 2.29% during the quarter on a high base.