India manufacturing PMI, S&P Global survey, 31-month high
Going ahead, business confidence towards growth prospects improved to a five-month high in May, says the S&P Global survey. (Representational image)

PMI for May stands at 58.7, another indicator of manufacturing revival

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The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) for May 2023 came in at 58.7 on Thursday (June 1). This was higher than the previous month’s 57.2, reflecting a marked improvement in the sector. In PMI parlance, a print above 50 means expansion while a score below 50 indicates contraction.

According to a survey, the index rose at the greatest speed since October 2020, largely owing to strong demand and output. Also, hiring surged at the fastest rate in six months.

There was an upsurge in factory orders in May for the 23rd month running. Exports added to the momentum of fresh orders. International sales expansion came in at the fastest rate in six months. Demand was healthy across manufacturing industries, and supply chain conditions are improving.

Stocks of purchases rose at an unseen pace in May. Better supply conditions and increases in input purchases revved inventory growth.

As per a report by Bank of Baroda on global PMI numbers, “Flash PMI readings for Jan 23 of major economies remained in contraction territory. In the US, the composite reading was at 46.6, for the UK at 47.8, and for Australia at 48.2.”

Also read: India’s manufacturing PMI hits 3-month high in March amid demand resilience

Robust demand for Indian-made products’

“The PMI’s spotlight on soaring sales showcases robust demand for Indian-made products both domestically and internationally,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

“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 market. Combined, they also generated more employment opportunities in May,” continued Lima.

Companies registered the quickest expansion in international sales for six months, the survey said. As per the report, the surge in sales paved the way for stronger increases in production, employment, and quantities of purchases.

Also read: Steady growth evident in India’s manufacturing PMI for February

With supply chain-conditions improving further, companies noted a record accumulation in input inventories, the report added.

“The record increase in input stocks shows a better preparedness of manufacturers in managing supply chains. This should allow firms to mitigate potential disruptions, maintain a steady flow of production, and demonstrate the industry’s resilience in the face of challenges,” Lima said.

‘Demand strength leads to higher selling charges’

On the price front, cost pressures remained historically mild, but demand strength facilitated a solid and quicker increase in output charges.

“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 a stronger upward revision to selling charges,” Lima said.

Lima further noted that demand-driven inflation is not inherently negative, but could erode purchasing power, create challenges for the economy, and open the door for more interest rate hikes.

Also read: India’s services sector growth climbs to near 13-year high in April: PMI

Going ahead, business confidence towards growth prospects improved to a five-month high in May. Publicity and demand resilience were among the reasons cited for upbeat forecasts.

The S&P Global India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. Data collection began in December 2005.

(With agency inputs)

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