Activity across India’s industrial sector improved sharply in May with the latest manufacturing PMI report from Markit rising to 52.6.
The reading, above the 51.3 level of April, marked the fastest pace of acceleration seen since December 2014.
In line with the headline increase, new order growth accelerated at a faster rate while output grew at the fastest pace since January.
Despite the improved reading Markit economist Pollyanna De Lima suggests further rate cuts from the Reserve Bank of India (RBA) are likely given inflationary pressures remain subdued.
“PMI data signalled a further robust expansion of the Indian manufacturing economy in May. Both output and new order growth accelerated to four-month highs, whereas the rise in export orders lost traction. The outlook for the sector is, however, clouded by a stagnant jobs market as firms remain uncertain about the sustainability of the upturn.
Input cost inflation ticked higher and output prices were raised in May, but inflation rates are nonetheless weak in the context of historical data. This indicates that further rate cuts are still on the horizon.”
Markets will not have to wait long to see if De Lima is correct — the RBI is scheduled to announce its June monetary policy decision late Tuesday Sydney time.