Overall, the PMI suggests the economy is in a weak growth/low inflation environment
India’s manufacturing PMI moderated to 50.1 in May from 51 in April. In Q2 (Apr-
May), the PMI has averaged 50.6 versus 53.1 in Q1, suggesting that the manufacturing growth momentum weakened early in Q2, dashing hopes of a recovery. The decline has been attributed to a slower pace of new work and continuing power outages.
Though the May reading was the lowest since March 2009, the overall index has held above the watershed 50 level that divides growth from contraction.
The output index fell into the sub-50 contraction zone, at 48.6. Export new orders picked up in May, but domestic new orders were weaker, data from a survey by Markit Economics and HSBC Bank showed.
Weak growth is reflected in falling prices, with both input and output prices lower this month. In fact, the output price index fell below 50 to 49.8, suggesting a sharp fall in core inflation ahead. Overall, the PMI suggests the economy is in a weak growth/low inflation environment.
Commenting on the India Manufacturing PMI survey, Leif Eskesen, chief economist for India & ASEAN at HSBC said: “Economic activity in the manufacturing sector slowed further in May as output contracted in response to softer domestic orders. In addition, power outages hampered output and led to a jump in backlogs of work as businesses struggled to meet orders. Inflation gauges also eased, and output prices even fell in sequential terms on the back of tougher competition and receding raw material prices. These numbers have heightened the probability that the RBI will fire another salvo at its June policy meeting.”
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