Growth in India’s private sector economy slightly contracted in May, with the HSBC Flash India PMI Composite Output Index at 58.1, down from 58.2 in April. Despite this, there was still a noticeable expansion in private sector activity. The service economy experienced increased growth, but this was offset by a weaker rise in factory production.
Input price inflation rose slightly in May after a decline in April. However, companies managed to limit passing on the additional cost burdens to clients by raising output charges to a lesser extent. Service providers fared better than manufacturers and faced softer inflationary pressures.
Manufacturing activity saw a slight easing as the rates of expansion in output and new orders moderated. Growth in new export orders also softened significantly. Despite these, the Manufacturing PMI remained close to its long-run average, supported by ongoing inventory building.
Finished goods stocks increased for a second consecutive month, and the rate of stock purchases rose at the fastest pace in three months. Input prices intensified, rising at the sharpest rate since July 2022, according to Pranjul Bhandari, Chief India Economist at HSBC.
New business orders placed with manufacturing companies and service providers grew at slower rates in May, leading to a drag on composite growth. The private sector economy in India experienced a notably weaker expansion in new export orders, the slowest in 19 months.
Despite a dip to a three-month low, business confidence remained positive in May. Competitive pricing strategies, marketing efforts, and expectations of improved market conditions in the future supported this optimism. The HSBC Flash India Manufacturing PMI dropped from 54.7 in April to 54.3 in May, indicating the second-weakest improvement in the sector’s health in nearly four years.
