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India's factory output stays strong in May despite inflation

The S&P Global India Manufacturing Purchasing Managers' Index (PMI) though declined marginally last month to 54.6 from 54.7 a month back. A reading above 50 indicates expansion in activity, while a sub-50 print is a sign of contraction.

ET Now Digital

Updated Jun 1, 2022, 12:04 IST

Photo : BCCL

India's factory activity rose at a better-than-expected pace last month helped by a continuous increase in new orders and production despite inflation, according to a private survey.

This was also the 11th consecutive 50+ print for the manufacturing PMI, which "pointed to a sustained recovery" and was "consistent with a solid improvement in operating conditions".

Demand showed signs of resilience in May, improving further in spite of another uptick in selling prices. Companies reported a marked increase in total new orders that was broadly similar to April. May data also highlighted a notable uptick in growth of new export orders. The rate of expansion was sharp and the fastest since April 2011.

Indian manufacturers signalled a further increase in output prices halfway through the first quarter of fiscal year 2022-23. Having accelerated to the fastest in over eight-and a-half years, the rate of inflation was marked.

“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 panelists forecast output growth over the coming 12 months, 88% foresee no change from present levels," the survey added.

The survey comes a day after India's economic growth further slowed during the fourth quarter, hit by Omicron-led restrictions in January, global supply shortages and higher input costs. Gross domestic product (GDP) in the January-March period stood at 4.1%, its weakest in a year, amid rising risks from price pressures.

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