India's Flash PMI To 54.6 As Private Sector Growth Recovers In August On Back Of Services Activity

India’s private sector business activity showed a modest recovery in August after touching a four-year low in the previous month, as stronger services growth helped offset a slowdown in manufacturing. The HSBC Flash India PMI, compiled by S&P Global, rose to 54.6 in August from 54.3 in July.

Although the index remained above the 50-point mark that separates expansion from contraction, August marked the 61st consecutive month of growth. However, it was still the second-weakest reading since March 2022, indicating that overall momentum remains subdued.

Services sector provides support

The improvement in overall activity was largely driven by the services sector. The Flash India Services PMI Business Activity Index increased to 54.5 in August from 53.3 in July.

Services companies reported a modest acceleration in business activity and new orders after experiencing their weakest expansion in more than four years in July. Growth in overall new orders also improved, although the pace remained considerably weaker than the levels typically recorded in recent years.

The stronger performance of services also supported employment growth across the private sector. Companies increased hiring to meet rising demand. However, the gains were concentrated in services, while manufacturing employment declined for the first time in around two-and-a-half years.

Manufacturing growth hits five-year low

Manufacturing activity moved in the opposite direction. The HSBC Flash India Manufacturing PMI declined to 52.9 from 53.5 in July, with both output and new orders recording their weakest growth in five years.

Despite the slowdown, manufacturing companies continued to report increases in production and new business. However, purchasing activity weakened and inventories of finished products remained elevated.

On the price front, input-cost inflation eased to its lowest level in seven months. At the same time, companies increased selling prices at a faster pace, suggesting that businesses were passing a greater portion of their costs on to customers.

HSBC Chief India Economist Pranjul Bhandari said stronger services activity kept overall private-sector growth broadly stable, while weaker manufacturing momentum and increased price pass-through remained key features of the August survey.