Manufacturing gains push India's flash PMI to 60.7 in July, services dip

Flash HSBC India PMI signals expansion as manufacturing activity picks up climbing to 59.2 while India's services PMI eases to 59.8 in July

Business activity in India accelerated in July, driven by manufacturing, with the headline HSBC Flash India Composite PMI Output Index rising to 60.7 from 58.4 in June, according to S&P Global on Thursday. 

Pranjul Bhandari, chief India economist at HSBC, said, "India’s flash composite PMI remained healthy in July at 60.7. The strong performance was bolstered by growth in total sales, export orders, and output levels. Indian manufacturers led the way, recording faster rates of expansion than services for all of the three aforementioned metrics. Meanwhile, inflationary pressures continue to heat up as both input costs and output charges rose in July. Finally, business confidence fell to its lowest mark since March 2023, while employment growth moderated to its weakest pace in 15 months."

Services sector eases to 59.8 in July

The Services PMI was 59.8 in July, down from 60.4 in June. While services activity continued to grow, the pace of expansion softened, though it remained sharp by historical standards.

 

Indian firms remained optimistic about output growth over the next 12 months. However, overall sentiment slipped to its lowest level since March 2023, weighed down by concerns over price pressures and rising competition for new work. 

 

Survey participants reported demand growth from across Asia, Europe and the US. While growth in new export orders accelerated in the services sector, it slowed among goods producers.

India’s manufacturing sector posts highest reading in over 17 years

The Manufacturing PMI climbed to 59.2 in July from 58.4 in June — its highest level in nearly 17-and-a-half years — signalling a strong improvement in the health of the manufacturing sector.

 

At the composite level, overall sales expanded. International orders received by private sector firms in India rose sharply at the start of the second fiscal quarter. The rate of expansion was broadly similar to June’s and ranked among the strongest in the series’ history. 

Job creation sees weak growth

Job creation in the services sector moderated. Employment rose at the weakest pace in 15 months, marking a notable slowdown in hiring. The seasonally adjusted index for the services economy fell by nearly four points, reflecting this deceleration.

 

 

Input cost pressures rise across private sector in July

July data indicated a rise in input cost pressures across India’s private sector. Surveyed companies reported higher prices for aluminium, cotton, food items such as cooking oil, eggs, meat, and vegetables, as well as rubber, steel, and transportation. While the overall rate of input inflation was solid, it remained below the long-term average. 

 

Service providers experienced a sharper increase in input costs than manufacturers. Selling price inflation also accelerated as firms passed on increased costs to customers. The rate of output charge inflation exceeded the long-run trend, with stronger price hikes observed in both manufacturing and services.

What is PMI?

The PMI or Purchasing Managers’ Index is an economic indicator that measures overall business activity across manufacturing and services. It tracks production, new orders, employment, supplier performance, and inventories, based on responses from purchasing managers. A reading above 50 signals growth, below 50 indicates contraction, and a score of 50 points to no change in activity.