Image used for representational purpose.
| Photo Credit: Reuters

Business activity in India expanded at a faster clip this month from May thanks to gains in manufacturing and services, according to a business survey that also showed the pace of job creation was at its strongest in over 18 years.

Robust gains in both sectors at the end of the first fiscal quarter meant a strong start to India’s economy this financial year after it expanded by 8.2% last year – the fastest expansion among major countries – partly led by buoyant manufacturing.

HSBC’s flash India Composite Purchasing Managers’ Index , compiled by S&P Global, rose to 60.9 in June from last month’s final reading of 60.5.

That marked nearly three years above the 50-level separating growth from contraction on a monthly basis.

“The composite flash PMI ticked up in June, supported by rises in both the manufacturing and service sectors, with the former recording a faster pace of growth,” noted Maitreyi Das, global economist at HSBC.

The manufacturing index showed bigger gains to 58.5 from 57.5 in May while the dominant services industry’s reading rose slightly to 60.4 this month from 60.2, adding to the continued expansion in India even as the global economy slows.

That was backed by a strong expansion in both manufacturing output and orders as well as business gains among services firms.

New export orders expanded for a 22nd consecutive month in June and remained robust, though the pace eased slightly after record growth last month.

Robust demand prompted companies to hire more people, with overall employment generation rising at the fastest pace since April 2006. Job creation among manufacturers was higher than in the services sector.

Boosting jobs will remain the biggest challenge for the Narendra Modi government which got elected for a rare third term earlier this month, a Reuters poll showed.

Meanwhile, price increases at firms have eased since May, boding well for the outlook on retail inflation. Rises in services input costs eased to a four-month low, while the pace of increases in prices charged to clients was broadly unchanged.

“Input cost inflation eased slightly in June, but remained elevated with panellists citing increases in labour and material costs. The output price index suggests manufacturing firms were able to pass on higher costs to customers,” added Ms. Das.

“Optimism about future output weakened in June, but remained above the historical average.”

Even though business optimism weakened to a three-month low, the outlook for the coming year remained positive as companies expect output gains based on proposals in the pipeline, efficiency gains and forecasts for favourable exchange rates.

Bolstered by current and anticipated upticks in demand, manufacturers reported higher confidence levels with expectations of higher output a year ahead. File (Representational image)
| Photo Credit: Reuters

India’s manufacturing sector activity moderated slightly in April, but still witnessed the second-best improvement in operating conditions in three-and-a-half years, as per the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) which fell to 58.8 from the 16-year high of 59.1 recorded in March.

A reading of over 50 on the index indicates growth in activity levels. There was a sharp rise in new orders which grew at the second-strongest pace in almost 40 months, with domestic demand rising faster than export orders. Output growth eased from March but was still the second highest in 42 months.

Bolstered by current and anticipated upticks in demand, manufacturers reported higher confidence levels with expectations of higher output a year ahead. Firms hired more employees at a pace that was moderate, but still the quickest since September 2023. However, the pressure on operating capacities remained mild.

Even though input costs increased, producers ramped up input purchases to the highest level since last June, and their expansion of stock inventories was the third-strongest since early 2005 when the PMI data collection began. Expectations that demand conditions will remain conducive to growth supported inventory-building initiatives, a statement on the index said.

Price increases were reported for materials like aluminium, paper, plastics and steel, and producers raised selling prices during April at the fastest pace in three months, noting that labour costs had also gone up.

“On the price front, higher costs of raw materials and labour led to a modest uptick in input costs, but inflation remains below the historical average. However, firms passed these increases onto consumers through higher output charges, as demand remained resilient, resulting in improved margins,” said Pranjul Bhandari, chief India economist at HSBC.

The India Manufacturing PMI reading for April is milder than that signalled by the Flash PMI released on April 23 which was based on 75% to 85% of responses received from firms for the survey-based index. As per the flash reading, the manufacturing PMI was pegged at 59.1 in April, recording no change from March.

 India’s dominant services industry grew faster in March 2024 amid strong demand, according to a private business survey that also showed employment increased at the fastest rate in seven months and export business expanded at a record pace.
| Photo Credit: The Hindu

Sales and business activity in India’s Services sectors clocked their biggest expansion in over 13 and a half years in March, bolstered by a record uptick in export orders, as per the HSBC India Services Purchasing Managers’ Index (PMI) which rose to 61.2 to 60.6 in February. A reading of more than 50 on the index indicates growth in activity levels.

With fresh work orders increasing capacity pressures at service providers, they raised employment levels at the joint-fastest pace since November 2022 and the highest pace since August 2023. On the flip side, input costs as well as charges levied on customers grew at a faster pace, with output charges raised at the highest rates since July 2017.

Barring real estate and business services, input costs and output charges rose at a stronger pace for all sectors, with the highest input cost inflation seen in Consumer Services and Finance & Insurance seeing the steepest surge in selling prices. Firms surveyed for the index reported higher labour and material costs as key challenges.

Though business sentiment levels remained positive, they slipped to a four-month low in March, with some concerns emerging about competitive pressures. “India’s services PMI rose in March, following a small dip in February, on the back of strong demand that spurred sales and business activity,” said Ines Lam, HSBC economist.

Finance & Insurance services saw the highest increase in output and sales. New export business rose at the fastest rate since the PMI series started in September 2014, with firms noting gains in orders from Africa, Asia, Australia, Europe, the Americas and the Middle East.

With the Manufacturing PMI also reporting a sharp uptick in March, overall private sector output grew at the second-highest pace in 13.5 years, slightly lower than the upticks recorded in July 2023. The HSBC India Composite PMI Output Index rose from 60.6 in February to 61.8 in March.

Services firms reported higher increases in expenses, and also contributed more than factories towards selling price inflation, which quickened to a five-month high. 

Representational image only.
| Photo Credit: The Hindu

 

Manufacturing firms’ order books and output levels expanded at the fastest pace in nearly three years this August, as per the S&P Global India Manufacturing Purchasing Managers’ Index (PMI) that rose to 58.6 last month from 57.7 in July. 

A reading of over 50 on the index reflects growth in activity levels and August was the 26^th month in a row that the PMI score was above 50.   

Though input costs escalated, firms replenished their inventories at the second highest pace in 18-and-a-half years and restrained from hiking selling prices in tandem with higher costs. Firms raised output costs at the slowest pace in four months, though input costs rose at the fastest pace in a year. 

New orders grew at the fastest pace since January 2021, with export demand seeing the sharpest uptick since November last year. Firms surveyed for the index reported that they had secured new work from clients in Bangladesh, China, Malaysia, Singapore, Taiwan and the U.S. 

To cope with the additional work flow, Indian manufacturers reportedly hired a combination of permanent and temporary staff on both part- and full-time bases. However, overall employment grew at the slowest pace in four months. 

“The presence of stronger cost inflationary pressures serves as a reminder of the challenges inherent in managing growth. Firms addressed rising input prices by lifting selling charges. However, the need to maintain competitiveness helped restricted charge inflation,” noted Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. 

With the manufacturing PMI painting a vibrant picture of the sector in August, Ms. De Lima reckoned the sector looks set to provide a strong contribution to economic growth in the second quarter of 2023-24. Manufacturing GVA (Gross Value Added) grew 4.7% in the first quarter (April to June 2023) as per estimates released by the National Statistical Office on August 31.

“Companies’ strategic focus towards a global orientation were evident via a sharp and quicker expansion in international sales. Export-centric tactics should help ensure that production remains on an upward path in the coming months,” Ms. De Lima said.