Manufacturing Sector Expands At Softer Pace In May: Survey

India's manufacturing sector remained firm through May, though with a mild loss in momentum. A private survey revealed that companies indicated that working hours had been reduced amid an intensive heatwave, which somewhat hampered production volumes. New orders also rose at a softer pace, but exports increased to the highest in over 13 years.

The HSBC final India Manufacturing Purchasing Mangers' Index, compiled by S&P Global showed, that it fell from 58.8 in April to 57.5 in May, signalling a slow in manufacturing activities. The HSBC India Manufacturing PMI® is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.

"The manufacturing sector remained in expansionary territory in May, albeit the pace of expansion slowed, led by a softer rise in new orders and output," said Maitreyi Das, Global Economist at HSBC.

"Panellists cited heatwaves as a reason for lower work hours in May, which may have affected production volumes. In contrast, new export orders rose at the fastest pace in over 13 years, with a broad-based demand across geography," Das said.

Exports were the strongest in over 13 years as firms noted gains from customers across several countries in Africa, Asia, the US, Europe, and the Middle East.

On the price front, higher raw material and freight costs led to a rise in input prices.

Manufacturers were only able to pass on a part of this increase to consumers, resulting in a squeeze in manufacturing margins.

New orders during the month rose at a substantial pace that was nonetheless the slowest in three months, the survey said. It attributed the rise to marketing efforts, demand strength and favourable economic conditions.

Ongoing strong sales performances combined with upbeat growth forecasts fuelled job creation in May. Manufacturing employment rose to one of the greatest extents seen since data collection started in March 2005.

However, it believes that growth was reportedly stymied by competition and election-related disruptions. (ANI)