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India: Manufacturing PMI improves, while Services PMI deteriorates in May

June 3, 2015

The HSBC manufacturing Purchasing Managers’ Index (PMI) rose from 51.3 in April to 52.6 in May. As a result, the PMI remains above the 50-threshold that separates expansion from contraction in business activity in the manufacturing sector.

According to HSBC, the improvement was driven by larger increases in new orders and output. However, despite the increase in growth, employment was largely unchanged in May. Input price inflation picked up pace compared to April, but remains weaker than the series average. HSBC pointed out that, “PMI data signalled a further robust expansion of the Indian manufacturing economy in May. Both output and new order growth accelerated to four-month highs, whereas the rise in export orders lost traction. The outlook for the sector is, however, clouded by a stagnant jobs market as firms remain uncertain about the sustainability of the upturn.”

Meanwhile, the services PMI fell from 52.4 in April to 49.6 in May, which marked a 13-month low. As a result, the PMI now indicates that business activity in services is contracting. According to HSBC, the result came on the back of a decline in new work and a moderate increase in job creation. HSBC added that, “Restrained demand accompanied by sweltering heat and the earthquake led to falling new work. Nonetheless, the sector is expected to see a rebound in coming months, as these factors fade away.”

FocusEconomics Consensus Forecast panelists see fixed investment rising 6.5% in FY 2015/2016, which is up 0.2 percentage points from last month’s estimate. For FY 2016/2017, the panel expects fixed investment to increase 8.2%.


Author: Angela Bouzanis, Senior Economist

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India PMI May 2015

Note: HSBC India Purchasing Managers’ Index (PMI). A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction.
Source: HSBC and Markit.


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