Manufacturing PMI inches up in May on higher order flows

The HSBC Manufacturing PMI edged up to 51.4 in May from 51.3 in April.

By: ENS Economic Bureau | Mumbai | Published:June 3, 2014 2:50 am

India’s manufacturing sector growth inched up in May driven by higher domestic and export order flows, while input prices rose at their slowest rate in over a year, a business survey showed on Monday.

The HSBC Manufacturing Purchasing Managers’ Index (PMI), compiled by Markit, edged up to 51.4 in May from 51.3 in April. A figure above 50 indicates monthly expansion. The new orders sub-index, which includes domestic demand as well as orders from abroad, rose to 53.2 in May, a three-month high, from 52.5. A rise in the new orders index often is followed by better output in following months.

“The momentum in the manufacturing sector improved at the margin, thanks to higher domestic and export order flows,” said Frederic Neumann, co-head of Asian Economic Research at HSBC. The survey respondents said that output rose for amid stronger increases in new orders, although there were mentions that growth was stymied by powercuts and the elections.

“Output growth held steady as frequent power cuts forced firms to accumulate backlogs at a faster pace,” Neumann said. Growth of both total new orders and new export business accelerated during the month, leading to further job creation across the sector. Indian manufacturers indicated that purchasing activity increased further in May, however, output charges increased further.

“Encouragingly, input price pressures eased further, but with output prices still rising the RBI cannot take down its inflation guards,” Neumann said. The RBI had increased the key policy rate, repo, three times since Raghuram Rajan took over as the Governor in September.

The RBI’s next bi-monthly monetary policy review meet is scheduled for Tuesday.

The latest PMI data show that India, now growing below 5 per cent on an annual basis, is still grappling with an inflation challenge. Input prices, the cost of raw materials that factories buy, rose at their slowest pace in over a year. The increase in prices factories charge for their goods accelerated in May, although Markit noted that a very small proportion of companies surveyed actually raised prices, mainly in consumer goods industries.

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