Gains in manufacturing and services sectors push flash PMI to 60.9 in June

The survey also noted that pace of job creation was at its strongest in over 18 years

Propelled by gains in manufacturing and services sectors, business activity in June got further strengthened, said a survey by HSBC on Friday. The survey also noted that the pace of job creation was at its strongest in over 18 years.

According to the survey carried out by the global banker, the headline flash composite Purchasing Managers' Index (PMI) figure rose to 60.9 in June, compared to a downward revised figure of 60.5 in May.

The index, which measures the month-on-month change in the combined output of India's manufacturing and service sectors, was inside growth territory for the 35th consecutive month. As has been the case since February, growth was stronger at goods producers than at service providers.

"Manufacturers saw a quicker improvement in the overall health of the sector at the end of the first fiscal quarter, with the HSBC Flash India Manufacturing PMI – a single figure snapshot of factory business conditions calculated from measures of new orders, output, employment, supplier delivery times and stocks of purchases – rising from 57.5 in May to 58.5 in June. There were stronger contributions from all of its five sub-components," the survey said.

Maitreyi Das, global economist at HSBC, said that 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.

"New orders gained growth momentum for both sectors, with a faster upturn among manufacturers. Meanwhile, new export orders slowed slightly in June, although the rate of expansion was the second fastest since the beginning of the series. As a result, capacity pressures became evident in June, leading firms to increase their staffing levels to the greatest extent in over 18 years," she added.

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

Fuelled by positive demand trends, manufacturers also purchased additional inputs for use in production processes as the rate of growth in buying levels was sharp and quicker than in May. Also, despite the upturn in quantities of purchases, suppliers were comfortably able to deliver materials in a timely manner, as seen by another modest improvement in vendor performance.

"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. Overall, optimism about future output weakened in June, but remained above the historical average," said Das

The flash PMI records 75-85 per cent of the total 800 Purchasing Managers Index survey responses by services and manufacturing firms received each month. The final manufacturing PMI headline figure for the month of June will be released on July 1 and is projected to slightly increase to 58.5. The services and composite PMI will be released on July 3.