Manufacturing PMI slows to 3-month low of 57.6 in May, demand still strong

Manufacturing PMI May 2025: Although new orders and production continued to rise, the rates of growth softened to three-month lows

India’s manufacturing sector experienced a slight slowdown in May 2025, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) dipping to 57.6 from 58.2 in April. This marks the lowest reading since February, though it remains well above the neutral 50.0 threshold and the long-term average of 54.1, indicating that growth in the sector is still intact.

 

The sector’s expansion was driven by healthy domestic and overseas demand, successful marketing initiatives, and increased export orders, which rose at one of the fastest rates in three years. Firms reported strong demand from key global markets, including Asia, Europe, West Asia, and the United States.

 

 

Those surveyed attributed the deceleration in May to elevated competition, cost pressures, and the ongoing India-Pakistan conflict, which has weighed on business sentiment. 

 

Record surge in employment

May also saw a record surge in employment. Hiring rose at the fastest pace in the PMI survey's history, with a greater emphasis on permanent roles over temporary ones. This sustained job creation helped firms manage workloads efficiently, halting a six-month streak of rising backlogs.

 

Commenting on the report,  Chief India Economist at HSBC Pranjul Bhandari said, “India’s May manufacturing PMI signalled another month of robust growth in the sector, although the rate of expansion in output and new orders eased from the previous month. The acceleration in employment growth to a new peak is certainly a positive development. Input cost inflation is picking up, but manufacturers seem to be able to lessen the pressure on profit margins by raising output prices.”

 

Cost pressures rise in May

Cost pressures intensified in May, with input inflation reaching a six-month high. Key cost drivers included aluminium, cement, iron, leather, rubber, and sand, alongside rising freight and labour expenses. To maintain profit margins, firms responded by raising selling prices at one of the steepest rates seen in over 11 years.

 

Despite these inflationary pressures, confidence among Indian manufacturers remained high. Businesses expressed optimism for output growth over the coming year, citing advertising and increased customer enquiries as key opportunities.

 

Industrial production slows to 2.7 per cent in April

Overall, industrial production growth slowed to 2.7 per cent in April, the lowest in eight months, down from the revised 3.94 per cent growth in March. This decline was largely due to a high base effect and a sequential drop in mining output, recent data from the National Statistics Office (NSO) showed.

 

Data from the Index of Industrial Production (IIP) revealed mixed performance across different sectors in April. The mining sector saw a contraction of 0.2 per cent, marking its first decline in eight months. Output in the electricity sector also slowed to a seven-month low, with growth decelerating to 1.1 per cent. Manufacturing output grew by 3.4 per cent, though at a slightly slower pace compared to previous months. 

What is manufacturing PMI?

The Manufacturing PMI is a critical economic indicator that gauges business activity within the sector. Derived from survey responses from purchasing managers, it tracks key areas like production levels, new orders, employment, supplier performance, and inventory.