India: The private sector expands at a steady pace in May
June 5, 2019
The composite Purchasing Managers’ Index (PMI) produced by Nikkei and IHS Market was unchanged in May at April’s 51.7. As a result, the PMI remained above the 50-point threshold that separates expansion from contraction in the private sector.
The services PMI decreased for the third consecutive month in May, falling to 50.2 from 51.0. This was partly due to the slowest increase in new business orders in eight months, owing to a weaker domestic market as export orders increased at the fastest pace in just under a year. On the other hand, businesses remained optimistic about the economic outlook, and sentiment was close to the highest levels reached over the past 12 months. An upbeat mood led businesses to increase employment levels in May at a healthy rate, in addition to contained input inflation, which was at a nearly two-and-a-half year low. Output charges increased at a slow pace in May. In terms of backlogs of work, delayed client payments held back the completion of pending work; nevertheless, the accumulation in May was the weakest since January.
On the manufacturing side, the PMI increased to 52.7 in May from 51.8 in April, primarily on the back of quicker output growth. This was in part thanks to a strong pickup in sales, with factory orders rising faster than in April, buttressed by the joint-quickest increase in export orders in six months. Moreover, manufacturers became more confident about output levels in the coming 12 months, with sentiment increasing on expectations of pro-business public policies following the general elections. Higher output and expectations led to the fastest increase in employment since February. In terms of inventories, stocks of inputs were unchanged in May compared to April, while stocks of finished goods fell. On the prices front, input cost inflation accelerated slightly in May, while output charges were broadly unchanged.
Author: Edward Gardner, Economist