India’s private sector continues to expand, job creation at 18-year high: PMI

Business activity continued to grow in June owing to the increased strength of the manufacturing and service sectors, reported a flash survey by HSBC Holdings on Friday. The survey also revealed that job creation was at an 18-year high.

The HSBC flash India Composite Purchasing Managers’ Index saw an upward adjustment to 60.9 in June, compared to 60.5 last month. This index compiled by S&P Global measures the month-on-month change in the combined output of India's manufacturing and service sectors.

The manufacturing sector witnessed a sharp increase in growth rate, as HSBC flash India Manufacturing PMI increased from 57.5 in May to 58.5 in June. The HSBC flash India Service PMI business activity index also grew to 60.4 this month, in contrast to 60.2 in May.

“New orders gained growth momentum for both sectors, with a faster upturn among manufacturers,” said Maitreyi Das, Global Economist at HSBC.

New export orders increased for the 22nd consecutive month in June, with gains coming from Africa, Asia, Australia, the Americas, Europe, and the Middle East. The rate of expansion was the second fastest it had been since the series was started in September 2014. The service sector performed better on this front.

The robust increase in demand pushed the firms to hire more people, with the rate of employment generation being the highest in eighteen years.

Driven by positive demand trends, manufacturers purchased additional inputs for use in the production process. The survey found that the rate in buying levels was sharp and quicker than in May.

“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.

Business confidence remained positive in June as private sector firms in India expect marketing efforts to bear fruits and positive demand momentum to persevere.

The overall degree of optimism weakened to a three-month low, but remained above the series average, the report concluded.