India's Manufacturing PMI Surges To 31-Month High, Maintains Expansion For 22 Consecutive Months

India's manufacturing sector continued to show robust expansion in May, according to data released on June 1.

The S&P Global Purchasing Managers' Index (PMI) for manufacturing reached a 31-month high of 58.7, up from April's reading of 57.2.

The PMI has now remained above the key level of 50 for 22 consecutive months, indicating sustained growth in activity.

In a statement, S&P Global highlighted the positive developments seen in May. The demand conditions exhibited remarkable strength, with factory orders experiencing the fastest growth since January 2021.

This surge in sales led to increased production, employment, and quantities of purchases. Furthermore, supply-chain conditions improved, resulting in a record accumulation of input inventories.

The report also noted a significant boost in international sales, driven by exports, leading to the quickest expansion in this area in six months.

While average cost burdens increased moderately, they remained below the long-run average. However, selling prices rose at a faster pace in May. The rate of inflation reached a one-year high, driven by sustained increases in input costs and a supportive demand environment.

The data indicates a positive outlook for India's manufacturing sector, with strong demand, improved supply-chain conditions, and robust international sales contributing to the expansion. The acceleration in inflation, coupled with rising selling prices, suggests a favorable environment for businesses operating in the sector.

“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,” Economics Associate Director at S&P Global Market Intelligence, Pollyanna De Lima, said.

“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," she added.