India’s private sector activity gathered momentum in September despite the ongoing war in West Asia and the surge in crude oil prices. Stronger private sector growth in India was led by the manufacturing sector while services also saw better performance compared with August, S&P Global said on Wednesday.
The HSBC Flash India Composite Purchasing Managers’ Index (PMI) rose to a three-month high of 56.5 in September from 54.3 in August. A PMI reading of more than 50 denotes expansion in activity from the previous month, while a print below 50 indicates contraction.
“The HSBC Flash PMI data for September pointed to a firmer improvement in business conditions across India’s private sector economy,” S&P Global said in a release. “Meanwhile, inflationary pressures faded and business confidence strengthened,” S&P Global said.
The uptick in activity was led by the manufacturing sector with the flash manufacturing PMI rising to a seven-month high of 55.7 in September from 52.8 in August. Services PMI also rose to 55.8 from 54.1 in August.
Output growth increased across manufacturing and services firms in September. Aggregate new orders also rose at a quicker pace, prompting a solid expansion in jobs, S&P Global said.
Firms saw a faster increase in total new business during September, with stronger demand improvement in the manufacturing sector.
Manufacturing firms also reported higher sales growth in September compared to their services counterpart. “Service providers indicated that marketing efforts helped boost order intakes, with mentions of stronger demand for properties, transport services and new travel bookings featuring in the qualitative part of the survey,” S&P Global said. Services firms also saw a rise in client interest for software and digital solutions.
Manufacturing firms reported stronger demand for aluminium products, electronic items, food, pharmaceutical goods, and new models in general, S&P Global said.
The rate of expansion of exports in September was the lowest in nearly three years, hit by the war in West Asia. “The moderation reflected slower growth at services firms as manufacturers saw a marginally stronger increase in new work from abroad,” S&P Global said.
Companies continued to hire more employees in September amid sustained growth of output and new orders. Job creation was recorded in both the manufacturing and service sectors, with rates of expansion broadly similar, S&P Global said.
“Renewed tensions in the Middle East have once again led firms to build buffers to manage the uncertainties. Input purchases picked up pace and the stocks of finished goods index is now at an 11-and-a-half-year high,” Pranjul Bhandari, chief India economist at HSBC, said.
Input cost inflation across the private sector fell to its lowest since January, with lower cost pressures at services companies offsetting a pick-up among manufacturers. Firms that reported higher cost burdens attributed this to increased spending on electrical components, foodstuff, fuel, metals, pharmaceutical ingredients, and technology resources.
Selling price inflation was broadly unchanged at the composite level in September. “A stronger increase in factory gate charges contrasted with a weaker rise in prices levied by services firms,” S&P Global said.
Business confidence regarding the year-ahead outlook for output improved in September across the private sector, with overall optimism at a four-month high.
“Nevertheless, the headline improvements in September were nowhere near enough to salvage the third quarter, whose profile was tarnished almost irreparably by both indices hitting new post-Covid lows in July (for services) and in August (for manufacturing),” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics. Reassuringly, at least, leading indicators continued to recover towards the end of the quarter, pointing to a continued rebuild of positive momentum in the October-December quarter, Chanco said.