Manufacturing PMI falls to 3-month low amid softer growth in output, orders

Growth in India's manufacturing sector moderated in May, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) falling to a three-month low of 57.6, down from 58.2 in April, amid softer increases in output and new orders, according to survey data released on Monday.

Despite the decline, the seasonally adjusted PMI remained well above the neutral mark of 50.0 and its long-run average of 54.1.

“India’s May manufacturing PMI signalled another month of robust growth in the sector, although the rate of expansion in output and new orders eased from the previous month,” said Pranjul Bhandari, Chief India Economist at HSBC.

The monthly report suggest that the demand strength continued to support sales and production even as competition, inflation and the India-Pakistan conflict weighed on growth.

New export orders rose at one of the fastest rates seen in the past three years amid favourable demand from Asia, Europe, the Middle East and the US. However, overall output and sales grew at their weakest pace since February.

Manufacturers responded to positive sales trends by ramping up input purchases and hiring additional workers. The employment growth hit a new series record, with permanent roles accounting for a larger share of job creation than temporary positions.

“The acceleration in employment growth to a new peak is certainly a positive development,” Bhandari noted.

Input cost inflation surged to a six-month high, led by higher prices for raw materials such as aluminium, cement, iron, leather, rubber and sand. Firms also reported rising freight and labour costs and, as a result, firms increased their selling prices in May.

Despite mounting cost pressures, manufacturers remained upbeat about future output, citing opportunities arising from advertising and new customer enquiries.

Stocks of purchases rose at the second-fastest rate since August 2024, though inventories of finished goods declined for the sixth straight month.

The PMI survey is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.