India’s private sector activity slowed sharply in July. The HSBC Flash India PMI Composite Output Index fell to 54.3 in July from 57.1 in June, marking the slowest expansion in private sector activity since March 2022.
Services PMI Business Activity Index also dropped to 53.1 in July from 57.4 in June, its weakest level in 53 months.
Meanwhile, manufacturing showed signs of resilience, with the Manufacturing Output Index improving to 57.0 from 56.3, even as the headline Manufacturing PMI slipped marginally to 53.9 from 54.2.
A reading above 50 indicates expansion, while a reading below 50 signals contraction.
Middle East tensions drive inventory build-up
Pranjul Bhandari, Chief India Economist at HSBC, said: “Renewed tensions in the Middle East have once again resulted in firms building buffers to manage the uncertainties around the longevity of the supply-side shock. Finished goods and input inventories increased alongside a pick-up in purchasing volumes. Both, output and new export orders rose, even as the overall manufacturing growth eased slightly. Price pressures firmed, with output charge inflation gathering pace and signalling a renewed push to protect margins.”
The growth in new orders slowed to its weakest level in nearly four-and-a-half years. S&P Global said businesses faced increasingly difficult market conditions, stronger competition, order cancellations, fewer client enquiries and shortages of key raw materials.
Inflation pressures intensify
According to HSBC PMI report, companies reported faster increases in input costs due to higher fuel, labour, raw material and transportation expenses. Businesses passed on some of these higher costs to customers, pushing output price inflation to its fastest pace since April.