Flash PMI signals India’s private sector activity at three-month high in November

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Activity levels across India’s private sector are seeing a modest uptick this month, even as cost pressures have surged to a 16-month high for both services and manufacturing players, compelling them to raise prices charged to customers at a pace not seen since February 2013, as per the HSBC Flash India Purchasing Managers’ Index (PMI).

However, manufacturing sector growth slipped lower this month, while services growth ticked upwards. The Flash PMI is an early economic indicator for an ongoing month, based on 80% to 90% of responses to a private survey of purchasing managers across 400-odd companies in manufacturing and services sectors conducted by S&P Global Market Intelligence.

The HSBC Flash India Composite Output Index, that combines responses from services firms and goods producers, rose to 59.5 in November, a three-month high, from a final PMI reading of 59.1 in October. PMI readings of more than 50 indicate an expansion in activity.

HSBC Flash India Manufacturing PMI cooled to 57.3 in November, marginally lower than October’s 57.5 reading. However, compared with services providers, goods producers saw a faster upturn in new orders for the third straight month amid strong demand conditions and rising export orders.

The uptick in new business bolstered this month’s job creation among surveyed services firms to the highest level recorded since this data became available in December 2005.

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However, inflation crimped the upside as manufacturers reported higher prices for a range of raw materials, including aluminium, cotton, leather and rubber, while services firms weighed in on greater food costs, particularly for cooking oils, eggs, meat and vegetables, and higher wage bills.

“In response to rising operating costs, private sector companies in India hiked their selling charges again during November. The rate of inflation was sharp and the fastest in just under 12 years. Firms suggested that demand strength allowed them to pass on additional cost burdens to their clients,” S&P Global noted.

November’s initial PMI findings also indicate a rebound in business confidence levels, with firms’ expectations on future output at a six-month peak.

“India’s flash composite PMI moderately expanded from a final reading of 59.1 in October to 59.5 this month. Services saw a pick-up in growth, while the manufacturing sector managed to outperform expectations despite a marginal slowdown from its October final PMI reading. Meanwhile, price pressures are rising for raw materials used by manufacturers, as well as food and wage costs in the services sector,” said Pranjul Bhandari, chief India economist at HSBC.