Gains in new orders, biz activity surge pushes flash PMI to 61.4 in July

The private sector economy continued to expand in July, according to a survey by HSBC on Wednesday, propelled by an increase in business activity in both the manufacturing and services sectors. 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 61.4 in July, compared to 60.9 in June.

The index, which measures the month-on-month change in the combined output of India’s manufacturing and service sectors, was in growth territory for the 36th consecutive month. 
 

“Backlogs of work rose further, prompting the best upturn in employment in over eighteen years. The latest results also revealed that rising material and labour costs added to inflationary pressures,” the survey noted.
 

Pranjul Bhandari, chief India economist at HSBC, said that the flash composite output index signalled continued robust growth in India’s private sector and the rise in output in July was led by a further increase in business activity in the manufacturing sector, while the pace of expansion in services output also accelerated and remained well above its long-run average. 
 

“As a result, companies turned more optimistic in July, following a moderation in business confidence in June. We note that the rate of input-cost inflation continued to trend higher in both sectors, which has driven firms to keep raising sales prices,” she added. The survey notes that the new orders placed with private sector firms in India rose sharply in July. As was the case for output, rates of expansion accelerated in the manufacturing and service sectors.

 

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 July is projected to slightly increase to 58.5. 

On the export front, the survey noted that while the new export orders index came in below that for total new orders, it remained significantly above the neutral level of 50.0. 

“Panel members continued to note greater exports to several parts of the world. On this front, the service economy signalled stronger growth,” the survey said.
 

The survey also noted that there was a pick-up in capacity pressures among private sector companies in India, as seen by a quicker increase in outstanding business volumes. 
 

“Although slight, the pace of accumulation was above its long-run average. In turn, firms continued to hire extra staff. Aggregate employment expanded at one of the strongest rates seen in just under 19 years of data collection. Job creation was stronger at manufacturing companies than at their services counterpart,” the survey said. 
 

Amid reports of higher material, transportation and labour costs, overall input prices rose further in July. The rate of inflation was solid, faster than in June and broadly aligned with its long-run average. Manufacturers particularly noted higher prices for coal, leather, pharma products, rubber and steel. 
 

Services companies specifically cited egg, meat and vegetables as sources of inflation. A pick up in cost pressures, alongside positive demand trends, reportedly encouraged companies in India to increase their own selling prices in July.
 

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 July will be released on August 1 and is projected to slightly increase to 58.5. The services and composite PMI will be released on August 5.