A surge in demand, domestically and from abroad, saw the manufacturing sector put up a strong performance in May. The Purchasing Managers’ Index (PMI) for the month surged to a 31-month high of 58.7. The good news is that job creation also went up.

The index was at 57.2 in April. Prepared by S&P Global on the basis of a survey conducted among executives of 400 manufacturing companies from different fields, the index is released much in advance of official data.

Sales numbers surge

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said the PMI’s spotlight on soaring sales showcases robust demand for Indian-made products, both domestically and internationally. While the upturn in domestic orders strengthens the foundations of the economy, rising external business fosters international partnerships and boosts India’s position in the global market. Combined, they also generated more employment opportunities in May.

Also read: Retailers clock moderate growth of 6 per cent in April

Supply chain

“The record increase in input stocks shows that manufacturers were better prepared to manage supply chains. This should allow firms to mitigate potential disruptions, maintain a steady flow of production, and demonstrate the industry’s resilience in the face of challenges,” she said.

Rising inflows of new business exerted pressure on the capacity of goods producers, as seen by another uptick in outstanding business. The rate of backlog accumulation was slight, but the quickest in seven months. In turn, capacity pressures supported job creation midway through the first fiscal quarter. Moreover, the rate of employment growth improved to a six-month high, added the report accompanying the index.

Also read:Supply chain professionals fear US recession as the top concern: survey

According to De Lima, while improvements in supply chains and generally subdued global demand for inputs helped curb input price inflation in May, heightened demand and previously absorbed cost burdens translated into a stronger upward revision to selling charges. “Demand-driven inflation is not inherently negative, but could erode purchasing power, create challenges for the economy and open the door for more interest rate hikes,” she said.

With supply chain conditions improving further, companies noted a record accumulation in input inventories. Meanwhile, cost pressures remained historically mild, but demand strength facilitated a solid and quicker increase in output charges. Of the five PMI sub-components, stocks of purchases showed notable vigour, increasing at an unprecedented pace in May. Monitored companies indicated better supply-chain conditions and a sustained increase in input purchasing boosted inventory growth.