Growth in India's manufacturing sector was steady in May, as demand showed signs of resilience, and even improved, amid record inflation.
The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index stood at 54.6 in May, little changed from 54.7 in April, pointing to a sustained recovery across the sector.
A print above 50 means expansion, and below 50 shows contraction.
"India's manufacturing sector sustained strong growth momentum in May. Thanks in part to the sharpest rise in international sales for eleven years, total new orders expanded further," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. "In response to demand resilience, companies continued with their efforts to rebuild stocks and hired extra workers accordingly."
Amid reports of new business gains, sustained improvements in demand and relaxed Covid-19 restrictions, manufacturers continued to scale up production in May. "The rate of growth was marked above trend and broadly in line with that recorded in April," the survey said.
The May PMI data also highlighted a notable uptick in the growth of new export orders. The rate of expansion was sharp and fastest since April 2011.
On the employment front, manufacturing jobs rose higher in May, owing to ongoing improvements in sales. Although only slight, the rate of jobs growth picked up to the strongest since January 2020.
On the price front, input costs rose for the 22nd successive month in May, with companies reporting higher prices for electronic components, energy, freight, foodstuff, metals and textiles. Although softer than in April, the rate of inflation remained historically elevated.
"There was little movement in the rate of input price inflation during May, which remains 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," Lima said.
Business sentiment was dampened by inflation concerns in May, with the overall level of confidence the second-lowest in just over two years.
"While around 9% of panellists forecast output growth over the coming 12 months, 88% foresee no change from present levels," the survey said.
High inflation forced the Reserve Bank of India to opt for an out-of-turn repo rate hike of 40 basis points in May. Another increase is likely in the June monetary policy review meeting.
According to official data, India's economy grew by 4.1% in the fourth quarter of 2021-22, pushing up the annual GDP growth rate to 8.7%.
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