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Economy picks up momentum in May on surging demand, indicators show

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The resurgence was driven by the expansion of service activity.

India’s economy gained momentum in May on pent-up service demand and higher output from industries as it continued to reopen following pandemic restrictions.

Five of eight high-frequency indicators compiled by Bloomberg News showed improvement, pushing the hand on a gauge dial known as ‘Animal Spirit’ to 6, from 5, for the first time since July and increased for the first time in more than a year. The measurement tool is based on a three-month weighted average score to better understand the variability in one-month results.

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This boom was driven by the expansion of services operations and strong growth in core infrastructure industries. However, an unprecedented increase in input prices, partly due to Russia’s invasion of Ukraine and a prolonged supply-demand imbalance, could damage sentiment in the future.

Higher costs of food, fuel, labor and transportation are forcing central banks globally to prioritize price stability over growth. The Reserve Bank of India has raised borrowing costs by 90 basis points so far this year and pledged to do more to bring price increases below its target ceiling of 6%.

Unusual weather and an increase in virus cases also threaten to hamper the recovery process. The number of daily virus infections has increased sixfold in the past one month.

Below are the details of the control panel. (For an alternative measure of growth trends, track monthly GDP by Bloomberg Economics – a weighted index of 11 indicators.)

Business activities

Purchasing managers’ surveys showed activity in India’s dominant services sector rose in May to an 11-year high, while momentum in the manufacturing sector remained steady . That helped drag the S&P Global India Composite PMI to its 10th straight month of expansion.

However, inflation expectations continued to weigh on business confidence as input costs rose to new record levels, the survey found. Companies will continue to pass on mounting costs to consumers in the near term, which could cause inflation to soar.

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India’s trade deficit widened to an all-time high of $24.33 billion in May on higher imports of gold and gasoline. Official data showed soaring commodity prices kept imports above $60 billion for the third straight month, while export growth slowed due to geopolitical uncertainty.

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Consumer Activity

India’s auto sector saw another month of decline in May, but the decline was smaller as some segments such as auto and two-wheeler sales showed growth compared to a year ago. last month.

Among other signs of consumption activity, bank credit rose 12.1% at the end of May, from 11.1% in April. Liquidity was also maintained at a surplus.

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Industrial activities

Two other key indicators of industrial activity, released with a one-month lag, showed strong growth in April. Factory output growth accelerated to an eight-month high of 7.1% from a year ago, led by a double-digit increase in power output, while manufacturing and mining also expanded. at a healthy pace. A similar trend was seen in the output growth of eight infrastructure sectors, which increased to 8.4% from 4.9% in March.

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Teja
Teja
I am passionate about journalism and using new technology to spread news. I am also interested in politics and economics, and I am always looking for ways to make a difference in the world. I am the CEO of Janaseva News, and I am 24 years old.

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