In August, India's business activity experienced a modest deceleration after hitting a remarkable peak in July, according to insights from HSBC. The HSBC Flash India Composite PMI Output Index, which gauges the combined output across manufacturing and service sectors, dipped to 60.5 in August, a slight drop from the final reading of 60.7 observed in July. This flash data, curated by S&P Global, aims to yield an early and precise reflection of the final economic statistics by collating responses from about 80-90% of survey participants, as stated by HSBC.
Dissecting the data further reveals that the HSBC Flash India Manufacturing PMI eased to 57.9 in August, compared to a final PMI of 58.1 in the previous month. This indicates a softening in the growth rate of factory output in the country. Pranjul Bhandari, the Chief India Economist at HSBC, reflected on this trend by noting, "Although new order growth for the manufacturing sector slowed to the weakest rate since February, the overall pace of expansion still remained robust, signaling persistent strong demand and favorable market conditions." Conversely, the HSBC Flash India Services PMI witnessed a marginal increase, rising to 60.4 in August from a final PMI of 60.3 in July.
This suggests that service sector firms are enjoying consistent growth, although the rate of this growth has also softened. The report highlighted that, in terms of international sales, the services sector experienced a more pronounced upturn compared to its manufacturing counterparts. Nevertheless, the rates of increase in sales for both sectors showed signs of easing.
Manufacturers faced a decline in outstanding business volumes, a situation partly alleviated by ongoing job creation. In contrast, service providers observed a continued rise in their work backlog for the 32nd consecutive month, according to HSBC. The private sector has responded to inflationary pressures by increasing their selling prices to manage elevated operating expenses, which stemmed from rising costs associated with building maintenance, food, labor, raw materials, and transportation, as per insights gathered from the survey participants.
The survey indicated that "charge inflation" reached its highest point in nearly 11 years for goods producers, while it displayed signs of softening among service providers. Despite these challenges, private firms maintained an optimistic outlook for business activity in the coming 12 months; however, this optimism has slightly waned due to concerns over inflation and escalating competition, as noted by HSBC..