Middle East War and Cooling Global Demand Soften India Manufacturing Growth in May

India's private sector growth eased in May as a manufacturing slowdown driven by the Middle East war and ​cooling international demand offset a marginal pick-up in the ‌service economy, a survey showed.

The HSBC flash Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, dipped to 58.1 this month from April’s final reading ​of 58.2, but was higher than a Reuters poll ​median forecast for 58.0. The 50-mark separates expansion from ⁠contraction.

May's deceleration was primarily centred in manufacturing, where new orders ​expanded at one of the slowest rates in nearly four ​years and production growth eased to its second-weakest level since mid-2022. The factory PMI dropped to 54.3 in May from April's 54.7.

The services PMI business ​activity index offered a slight counterweight, rising to 58.9 from ​58.8.

New export orders across the private economy grew at their weakest pace ‌in ⁠19 months with survey respondents noting the Middle East conflict and travel disruptions dampened international demand.

Overall input costs went up, driven by manufacturing outlays increasing at the steepest rate since July 2022 ​amid higher prices ​for energy, ⁠steel, and food. Firms limited the pass-through of these overheads with output charges at the composite ​level rising at the weakest pace since January.

Service ​providers ⁠hired additional staff at the greatest extent in nearly a year, outperforming the manufacturing sector where job creation softened.

With business optimism retreating ⁠to ​a three-month low, the latest figures suggest ​persistent cost burdens and cooling global demand are beginning to test the resilience ​of India's growth engine.

Reporting by Anant Chandak; Editing by Jacqueline Wong

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