Reflective of weaker gains in incoming new work and persistent power outages, output decreased in May, the
first decline registered since March 2009. That said, production fell only slightly. Order book volumes rose for the fiftieth consecutive month. The rate of expansion was, however, marginal and the slowest in that sequence. Panellists suggested that demand was maintained, but commented on increased competition for new work and tough market conditions overall,
particularly at home. Encouragingly, foreign orders rose at an accelerated pace during May. Growth in export business was solid and the fastest since January.
Suppliers' delivery times in the Indian manufacturing sector lengthened during May, amid reports of powercuts and strikes. That said, vendor performance deteriorated to a lesser extent than in April.
Commenting on the India Manufacturing PMIsurvey, 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."