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Indian manufacturing activity in May rose at its fastest pace in four months to 52.6

01 Jun 2015 Evaluate

Boosting further signs of recovery in the Indian economy after a good GDP data, Indian manufacturing activity rose at its fastest pace in four months in May as domestic demand rocketed despite rising costs for firms and consumers. The HSBC Manufacturing Purchasing Managers' Index, compiled by Markit, rose to 52.6 in May from April's 51.3 and pp to a four-month high, signaling a further improvement in business conditions. An index monitoring new business, which highlights underlying demand, jumped to 54.3 in May from 51.9.

Manufacturing sector gathered pace in May, with levels of production and new orders rising at the fastest rates since the opening month of 2015. It was the nineteenth month running that manufacturing output increased, with the rate of growth marked and the fastest since January.

The report noted a further increase in input costs and, consequently, charges were raised following a decline seen in the preceding month. Following a reduction seen in the previous month, output prices were raised in May. Underpinning higher output was improved demand from the domestic and foreign markets. The total volume of new work received increased for the nineteenth successive month and at the quickest pace since January. Growth was led by capital goods producers.

Though, despite the uptick in growth, manufacturing employment was broadly unchanged in May, while stock holdings were accumulated. Pre-production inventories increased for the twelfth straight month, albeit modestly. Holdings of finished goods also rose stock building attempts reflected the need to fulfill existing orders.

The report ahead of a possible interest rate cut by the Reserve Bank of India (RBI) in its policy review wills the India Inc. in an upbeat mood, as both output and new order growth accelerated to four-month highs, though rise in export orders lost traction and outlook remains unclear with stagnant jobs market.

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