According to the HSBC Flash Purchasing Managers’ Index (PMI) survey, private sector business activity in India showed a slight recovery in August after falling to a four-year low in July. Growth in the services sector compensated for the slowdown in the manufacturing sector.
The index, compiled by S&P Global, rose to 54.6 from 54.3 in July, which was the lowest since early 2022. Although the index remained above the 50 mark separating expansion and contraction, it was the second weakest since March 2022.
The survey noted that while the pace of new order growth improved in August, it remains low compared to recent trends. S&P Global commented: 'The improvement in expansion pace in August was concentrated in the services sector, which demonstrated a moderate acceleration after the softest business activity and new orders over 53 months in July, as growth rates picked up. In contrast, the manufacturing sector lost momentum in August, recording the weakest production and new order growth in five years.'
Specific data showed that the Flash India Manufacturing PMI fell to 52.9 from 53.5 in July, while the Flash India Services PMI Business Activity Index rose to 54.5 from 53.3 in July.
Overall job creation improved in August thanks to the services sector, as companies hired staff to meet growing demand. Meanwhile, employment in the manufacturing sector decreased for the first time in two and a half years.
According to the survey, the growth in input costs slowed to its lowest pace in seven months, while final prices rose faster. Respondents noted increased efforts to pass on costs to consumers.
Pranjul Bhandari, Chief Economist at HSBC India, stated that 'overall private sector output growth was generally stable, supported by stronger activity in the services sector. Growth in manufacturing weakened further in August, marking the weakest growth in five years. Output and new orders were still growing, but more slowly. Finished goods inventories remained high despite slowing raw material purchases. Cost pressures eased, but firms raised selling prices faster, indicating stronger cost pass-through.'
