India's business activity surged to a four-month high in September, as indicated by the HSBC Flash India Composite Purchasing Managers' Index (PMI), which climbed to 56.5 from 54.3 in August. This growth was primarily driven by a notable recovery in manufacturing and an increase in new orders, despite a significant slowdown in overseas demand.
The PMI, a key indicator of economic health, showed the strongest expansion in private sector activity since June. A reading above 50 suggests growth, while below 50 indicates contraction. The rise in September was fueled by accelerated output growth in both manufacturing and services sectors, with manufacturing leading the charge.
The flash Manufacturing PMI rose to 55.7 in September from 52.8 in August, marking its highest level in seven months. This improvement was attributed to increased demand across various sectors, including aluminium products, electronics, food, pharmaceuticals, and new product models. Services also saw growth, with heightened demand for property and transport services, new travel bookings, and digital solutions.
However, the domestic upswing was contrasted by a sharp moderation in export demand. While new export orders continued to rise, the pace slowed to its weakest in nearly three years, largely due to a decline in the services sector's performance.
Employment figures showed positive trends as companies expanded their workforce to manage higher output and new orders. This hiring spree was supported by the overall increase in new business.
Cost Pressures and Inflation
Inflationary pressures across the private sector eased in September, with input cost inflation dropping to its lowest since January. This was primarily due to reduced cost pressures in the services sector, which offset a rise among manufacturers. Companies facing higher costs pointed to increased prices for electrical components, food, fuel, metals, pharmaceutical ingredients, and technology resources.
Manufacturers responded by raising factory-gate prices more sharply, while price hikes among service providers moderated. Pranjul Bhandari, chief India economist at HSBC, noted that private sector activity gained momentum, led by stronger manufacturing. Bhandari highlighted that output and domestic orders accelerated, and companies built inventories as a precaution against renewed tensions in the Middle East.
Business sentiment improved in September, with optimism about future output reaching a four-month high across both manufacturing and services sectors. This positive outlook suggests continued growth in the coming months.
