India's manufacturing activities improve in May: HSBC PMI survey

Written by PTI | Bangalore | Updated: Jun 3 2014, 02:47am hrs
Factory PMIIndian factory activity edged up to 51.4 in May from 51.3 in April, slightly below the 51.6 median forecast.
India's manufacturing sector grew for the seventh straight month in May, fuelled by higher domestic and export order flows, an HSBC survey released today said.

The new orders rose to a three-month high in May, helping in boosting the investor sentiment with the 30-share benchmark Sensex surging over 467 points to close at 24,684.85 points.

The HSBC India Manufacturing Purchasing Managers' Index (PMI), a measure of factory production, edged up marginally from 51.3 in April to 51.4 in May, pointing to a slight improvement in operating conditions of the firms surveyed.

"HSBC's India manufacturing PMI rose marginally (51.4 vs. 51.3 in April) thanks to improved new orders (53.2 vs. 52.5 in April). New export orders also bounced in May (53.7 vs. 53.0 in April)," it said.

A PMI reading above 50 indicates growth while a lower reading means contraction.

"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, HSBC said.

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.

RBI had increased the key policy rate, repo, three times since Rajan took over as the Governor in September.

RBI's next bi-monthly monetary policy review meet is scheduled for tomorrow.

India's factory activity expands at slightly faster pace in May but below forecast: HSBC PMI

(Reuters) Indian factory activity expanded at a slightly faster pace in May, 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.

Still, that was slightly below the 51.6 median forecast in a Reuters poll. 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.

Indian firms also hired more staff in May.

Manufacturing output in India, which accounts for about 16 percent of the overall economy, has been languishing of late. The PMI sub-index for output has fallen around 7 percentage points compared with two years ago.

A prolonged slowdown in output from mines, utilities and factories has severely hurt growth.

India's stock market is trading near a record high on expectations that a government led by newly-elected Prime Minister Narendra Modi, India's first majority government in three decades, will help bring the economy out of its torpor.

Some companies reported that India's elections, which took place over most of April through the first half of May, hindered output growth.

But the latest PMI data show that India, now growing below 5 percent 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.

The Reserve Bank of India is expected to leave its benchmark interest rates on hold when it meets on June 3, according to a Reuters poll.