Heatwave slowed wheel of manufacturing in May, though job creation saw good growth, a survey result released on Monday showed.

The result known as HSBC PMI (Purchasing Managers’ Index) Manufacturing slipped to 57.5 in May as against 58.8 of April, a three-month low.

“The manufacturing sector remained in expansionary territory in May, albeit the pace of expansion slowed, led by a softer rise in new orders and output. Panellists cited heatwaves as a reason for lower work hours in May, which may have affected production volumes.,” Maitreyi Das, Global Economist at HSBC said.

The index is prepared by S&P Global on the basis of survey conducted among purchasing managers of 400 firms. Index above 50 shows expansion, while below 50 means contraction. With the latest reading, it is almost three years of expansion, though some months saw dip but not below 50.

“The positive news is that May recorded the highest level of positive sentiment among manufacturing firms in just under a decade, resulting in increased job creation,” Das said.

The report accompanying survey results said that ongoing strong sales performances combined with upbeat growth forecasts fuelled job creation in May.

“Manufacturing employment rose to one of the greatest extents seen since data collection started in March 2005,” the survey said. It may be noted that manufacturing is considered as biggest job multiplier. Moreover, it creates job opportunities in services sector too.

According to the report, the current sequence of expansion to nearly three years. Despite easing to a three-month low, the rate of increase remained sharp. Growth was supported by new business gains, demand strength and successful marketing efforts, anecdotal evidence showed.

The slowdown was attributed to reduced working hours amid intensive heat and rising production costs. Similarly, “new orders rose at a substantial pace that was nonetheless the slowest in three months. The rise was associated with marketing efforts, demand strength and favourable economic conditions.

Growth was reportedly stymied by competition and election-related disruptions,” it said.

Das noted that new export orders rose at the fastest pace in over 13 years, with a broad-based demand across geography. However, there is some worry due to inflation. “On the price front, higher raw material and freight costs led to a rise in input prices,” she said.

Further, manufacturers were only able to pass on a part of this increase to consumers, resulting in a squeeze in manufacturing margins.

The survey highlighted sustained growth of input purchasing among Indian goods producers. Buying levels rose at the slowest pace in four months, albeit one that was historically substantial. A further improvement in vendor performance, the best in more than 18 years, supported firms’ efforts to add to their input stocks. Inventories of raw materials and semi-finished items increased at one of the strongest rates in the series history.

Conversely, finished goods stocks decreased markedly during May as several firms leveraged warehoused products to meet higher demand, it found.

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