India’s manufacturing sector recorded stronger growth in May than initially estimated, according to the final HSBC India Manufacturing PMI data released by S&P Global on Monday. The figures suggested continued momentum in factory activity, with companies increasing stockpiling efforts amid the prolonged conflict in West Asia.
The seasonally adjusted Manufacturing PMI climbed to 55 in May, improving from April’s final reading of 54.7 and also surpassing the flash estimate of 54.3 released earlier. Any reading above 50 signals expansion compared to the previous month. The latest data marked the strongest improvement in manufacturing conditions in three months.
The report showed faster growth in new orders, output and purchasing activity compared to April, while stock accumulation also gathered pace. According to Pranjul Bhandari, the final PMI figures indicate that manufacturers may be continuing precautionary stockpiling as uncertainty linked to the Middle East conflict persists.
Manufacturers recorded their sharpest rise in output and new business since February. Growth was largely driven by stronger demand in the intermediate and capital goods sectors, although consumer goods producers witnessed a slower pace of expansion. Domestic demand remained the primary driver, while export orders also increased steadily, supported by stronger sales across parts of Asia, Europe, Kenya, Nigeria and West Asia.
At the same time, the ongoing tensions in West Asia continued to keep input costs elevated during May, even though inflationary pressures eased slightly compared to April. Companies reported higher expenses related to fuel, energy, raw materials and transportation. Input price inflation remained among the strongest recorded over the past 45 months, with capital goods producers facing the highest rise in costs.
Manufacturers also raised factory gate prices during the month, though the increase was smaller than the rise in input costs and below the average trend seen over the past year. Only a small portion of firms said they fully passed on higher costs to consumers, while many chose to absorb the pressure due to competitive market conditions, potentially impacting profit margins.
Despite mounting costs, companies accelerated purchases of raw materials in May. Buying activity expanded at the fastest pace in three months and stayed above the long-term average as businesses continued building contingency inventories.
Supplier delivery times improved once again, although not as sharply as in April, helping firms add further to pre-production stocks. Inventories of finished goods also increased for the second consecutive month. Some manufacturers reported that supply growth had outpaced demand, resulting in the fastest accumulation of finished goods inventories seen in more than a decade.
Rising production needs also supported hiring activity, with employment continuing to expand at a healthy pace during May, although the rate of job creation eased slightly from the previous month. Pending workloads rose for a second straight month, though only marginally.
Business sentiment remained optimistic overall, with manufacturers expressing confidence that cost pressures could ease later in the year. Firms also cited strong order pipelines and advertising efforts as factors supporting future growth expectations.
