Private sector activity expanded at a slower pace in June as demand for goods and services eased. Companies added fewer jobs and hiring momentum weakened according to the HSBC Flash India Purchasing Managers’ Index (PMI) released.
The HSBC Flash India Composite PMI Index fell to 57.4 in June from 59.3 in May. While the reading shows expansion, it is still the weakest pace seen since March. Economists believe manufacturing activity has been resilient despite hurdles and rising input costs. The slowdown in growth was widespread across the manufacturing and service sectors, with respective rates of expansion easing to two- and 17-month lows.
According to panel members, cost pressures and softening demand conditions curbed the latest upturn in business activity.
Falling from 59.3 in May to a preliminary reading of 57.4 in June, the HSBC Flash India PMI Composite Output Index – a seasonally adjusted index that measures the month-on-month change in the combined output of India’s manufacturing and service sectors – signalled a sharp rate of expansion that was nevertheless the weakest since March.
Pranjul Bhandari, Chief India Economist at HSBC, said “Private sector activity eased a bit in June. Growth of manufacturing output softened a tad as inventory-building lost steam after a few hectic months. New export orders remained resilient and the order-to-inventory ratio ticked up, pointing at resilient manufacturing activity down the line. Input costs across the private sector rose, in five
months.”
However, firms remained confident of an increase in output over the coming 12 months relative to present levels, but the overall degree of optimism was the weakest since January and below the long-run series average. Notably, the level of positive sentiment at manufacturers fell to the lowest in close to four years. Hence, goods producers limited buying activity, which rose at the weakest pace in two-and-a-half years during June. Subsequently, there was a softer increase in stocks of purchases and an outright decline in inventories of finished products. The HSBC Flash India slipped to a three-month low of 54.5 in June, down from 55.0 in May.