Key Highlights:
- HSBC Flash India Composite PMI Output Index rose to 56.5 in September, up from a final reading of 54.3 in August.
- Manufacturing led the latest upturn, with new orders rising at a quicker pace and prompting solid job growth.
- Stocks of finished goods hit an 11-and-a-half-year high, while output price inflation gathered pace, signalling firms protecting margins.
- Goods producers reported strengthening demand for aluminium products, electronics, food and pharmaceutical goods.
- Employment rose solidly across both manufacturing and services sectors, with broadly similar rates of expansion.
A Sharper Expansion in Business Conditions
India's private sector economy saw a firmer improvement in business conditions in the month of September, the HSBC Flash PMI data showed on Wednesday.
A Notable Rise in the Composite Index
With the HSBC Flash India Composite PMI Output Index at 56.5, up from a final reading of 54.3 in August, output growth ticked higher at both manufacturing and services companies, with goods producers leading the latest upturn. Aggregate new orders also rose at a quicker pace, prompting a solid expansion in jobs, according to the PMI data.
Easing Inflation and Rising Confidence
Meanwhile, inflationary pressures faded and business confidence strengthened, a combination that suggests firms are entering the final quarter of the year with a more optimistic outlook than in recent months.
The Strongest Expansion Since June
The latest print was consistent with a sharper expansion in private sector activity, one that was the most pronounced since June. Moreover, the respective index was back above its long-run average, indicating that current activity levels are not just improving month-on-month but are also outpacing the sector's typical historical performance.
Manufacturing Leads the Momentum
"Activity in the private sector gained momentum, led by stronger manufacturing. Output and new domestic orders rose at faster rates. Renewed tensions in the Middle East have once again led firms to build buffers to manage the uncertainties," said Pranjul Bhandari, Chief India Economist at HSBC, pointing to geopolitical risk as a factor shaping firms' operational decisions even amid the broader positive momentum.
Rising Input Purchases and Margin Pressures
Input purchases picked up pace, and the stocks of finished goods index is now at an 11-and-a-half-year high. Price pressures firmed at manufacturers, with output price inflation gathering pace, signalling a renewed push to protect margins, Bhandari noted, suggesting that manufacturers are responding to rising costs by adjusting their own pricing rather than absorbing the pressure entirely.
Faster Growth in New Business
Indian private sector firms recorded a faster increase in total new business during September, reflecting stronger overall demand conditions across the economy during the month.
Stronger Demand for Goods Than Services
Demand strengthened across both monitored sectors, though the more pronounced acceleration was seen at goods producers. Here, sales growth remained above that recorded by services companies and hit a seven-month high, indicating that manufacturing has outpaced services in terms of the pace of demand growth this particular month.
What's Driving Services Demand
Service providers indicated that marketing efforts helped boost order intakes, with mentions of stronger demand for properties, transport services and new travel bookings featuring in the qualitative part of the survey, offering a glimpse into which specific service categories are seeing the strongest pickup in activity.
What's Driving Manufacturing Demand
Goods producers, meanwhile, reported strengthening demand for aluminium products, electronic items, food, pharmaceutical goods and new models in general, showed the data, reflecting demand strength across a fairly diverse range of manufacturing sub-sectors rather than being concentrated in any single category.
Solid Employment Growth
Moreover, aggregate employment rose solidly in September, as companies continued to add to staffing capacity amid sustained growth of output and new orders. Job creation was recorded in both the manufacturing and service sectors, with rates of expansion broadly similar, indicating that the hiring momentum accompanying this month's stronger business activity was fairly evenly distributed across both major segments of the private sector economy.