The HSBC India Manufacturing Purchasing Managers’ Index (PMI) data for May 2025 was released yesterday, Monday, June 2, 2025. Here’s a detailed report on its findings:
HSBC India Manufacturing PMI – May 2025 Highlights:
- Moderation in Growth: The headline HSBC India Manufacturing PMI for May 2025 eased to 57.6, down from 58.2 in April. This marks a three-month low for the index, indicating a slight slowdown in the pace of expansion within the manufacturing sector.
- Continued Expansion: Despite the moderation, the reading of 57.6 remains comfortably above the neutral 50.0 threshold. A reading above 50 signifies expansion in manufacturing activity, so the sector continues to grow, albeit at a slower pace than the preceding months. It also remains above the long-term average of 54.1.
- Drivers of Growth:
- Strong Demand: The expansion was largely driven by healthy domestic and international demand. Surveyed firms reported robust demand from key global markets, including Asia, Europe, West Asia (Middle East), and the United States.
- Marketing Initiatives: Successful marketing initiatives also contributed to increased sales and production.
- Export Orders Surge: New export orders rose at one of the strongest rates in three years, indicating a significant boost from international markets.
Key Components and Deeper Insights:
- New Orders & Output: While new orders and overall output continued to rise, their rates of growth softened to three-month lows. This easing was attributed to factors like heightened market competition, rising cost pressures, and geopolitical tensions.
- Employment – A Bright Spot: A notable positive highlight was job creation. Manufacturers significantly ramped up hiring in May, with the rate of employment growth hitting a new series record. Firms showed a clear preference for permanent positions over temporary roles. This sustained job creation helped manufacturers manage their workloads effectively and contributed to ending a six-month period of increasing order backlogs.
- Input Costs and Selling Prices:
- Rising Input Costs: Input cost inflation intensified in May, reaching a six-month high. Manufacturers reported increased expenses for raw materials such as aluminum, cement, iron, leather, rubber, and sand, along with higher freight and labor costs.
- Passing on Costs: In response to these rising operating expenses and supported by strong demand, firms increased their selling prices at one of the sharpest rates in over eleven years to preserve profit margins.
- Supply Chain Performance: There was a further improvement in supply chain performance, with average lead times shortening to the greatest extent in four months. This efficiency contributed to an increase in input inventories. Conversely, inventories of finished goods continued to decrease for the sixth consecutive month, though the rate of depletion slowed.
- Business Sentiment: Despite the moderation in growth and rising cost pressures, Indian manufacturers remained strongly optimistic about the future. Business confidence for the next 12 months remained high, with firms expecting output to continue rising, underpinned by robust demand fundamentals, effective advertising, and new customer inquiries.
Expert Commentary:
Pranjul Bhandari, Chief India Economist at HSBC, commented that India’s May manufacturing PMI signaled another month of robust growth, despite the easing in output and new order expansion. She specifically highlighted the acceleration in employment growth to a new peak as a positive development and noted that manufacturers seem able to mitigate pressure on profit margins by raising output prices, even as input cost inflation picks up.
Overall Implication:
The May PMI data suggests that while the pace of growth in India’s manufacturing sector has slightly moderated, it remains on a strong expansionary path. The sector continues to be supported by healthy demand, both domestic and international, and is demonstrating robust job creation. The key challenge lies in managing rising input costs and passing them on to consumers, which could have implications for overall inflation and the Reserve Bank of India’s monetary policy decisions, especially with a potential rate cut expected this week.