Manufacturing PMI Rises to 52.6 in May

Manufacturing activity bounced back to a four-month high in May on the back of robust domestic demand, making for a strong start for the economy in the fiscal year. But the core sector index, which measures the output of eight infrastructure industries, shrank 0.4% in April from a year ago, worse than the 0.1% contraction in March.Then again, May auto sales have risen, with No. 1 player Maruti Suzuki posting a 13.8% rise from the year earlier. However, above all this looms the monsoon, with the first rains of the June-September season delayed further. There were, however, some tantalisingly welcome showers in parts of the country on Monday.
As long as the government is on a fiscal consolidation path and is taking proactive steps to ensure the timely supply of food grains, a rate reduction is called for, said DK Joshi, chief economist at Crisil.
The HSBC Manufacturing Purchasing Managers' Index rose to 52.6 in May from 51.3 in April, with a sub-index measuring new business rising to 54.3 in May from 51.9 in the previous month.
The PMI is a survey-based measure of manufacturing activity at 500 large companies and a reading of over 50 on the index denotes expansion. May marked the 19th successive month of expansion in manufacturing activity in the country. The sharpest growth was reported by consumer goods producers, the report showed. Capital and intermediate goods production also rose, the report said.
But the second consecutive month of contraction in core sector output in April took away some of the sheen, suggesting that not all levers of the economy are working.
The southwest monsoon is still some distance from the Kerala coast and the weather office does not see any quick progress in the annual weather system that irrigates fields, replenishes reservoirs and stimulates economic activity in rural India for the next few days. The weather office said Monday that conditions are becoming favourable for the monsoon hitting Kerala around June 5.
El Nino refers to a warming of the Pacific Ocean which appears to have a strong impact on weather around the world, among these being a rain-deficient monsoon.

Data released by the statistics office on Friday showed the Indian economy expanded 7.3% in FY15, with January-March growth coming in at a higher 7.5%. The government has forecast GDP growth of 8.1-8.5% in the next fiscal.
Numbers in the first two months have been encouraging, pointing to some pickup in the economy that is battling poor rural demand and weak corporate investment.
Government spending has also perked up, with total expenditure adding up to a high 8.7% of the budget estimate in April, the first month of the new financial year. The PMI survey showed that strong growth notwithstanding, manufacturing employment remained broadly unchanged in May.
The HSBC survey showed pressure of rising input costs, particularly in the case of chemicals, energy, metals and textiles. However, there was only a marginal rise in rates, pointing to weak pricing power because of sluggish demand.