Slowdown in business activity pulls flash PMI to its lowest levels in 2024

A slowdown in business activity of both the manufacturing and services sector pulled down the expansion of India’s private sector economy in September, according to a survey by HSBC on Monday.  According to the survey carried out by the global banker, the headline flash composite Purchasing Managers’ Index (PMI) figure declined to 59.3 in September, lowest in 2024, from an upward revised figure of 60.7 in August.

Although the index, which measures the month-on-month change in the combined output of India’s manufacturing and service sectors, was above the neutral 50-mark that separates contraction from expansion for the 38th straight month. “[The survey] signalled ongoing strong growth across the Indian private sector during September, although both output and new orders rose at the slowest rates in 2024 so far. Meanwhile, employment continued to rise solidly amid improved business confidence,” the survey noted. Pranjul Bhandari, chief India economist, HSBC said that the flash composite PMI in India rose at a slightly slower pace in September, marking the slowest growth observed in 2024, as both the manufacturing and service sectors exhibited similar trends during the month. “Nevertheless, the pace of growth remained well above the long-term average. Growth in new orders moderated by a touch in September, but hiring levels rose at a faster pace, supported by improving business confidence. In fact, the rise in employment in the service sector was the steepest since August 2022, as companies responded to robust growth in new orders,” she added.

On the price front, rates of both input cost and output price inflation were relatively muted, with service providers raising their charges at the slowest pace in just over two and-a-half years. “The pace of input cost inflation in the Indian private sector remained relatively muted in September, despite rising slightly from that seen in August. Marginally faster increases were seen across both the manufacturing and services sectors. Where costs rose, firms generally linked this to higher prices for raw materials and electricity,” the survey noted. “On the price front, input cost inflation rose at a slightly quicker pace in September. Rates of increase in output charges slowed in both sectors, with manufacturers experiencing a larger slowdown, implying a bigger reduction in their margins,” added Bhandari. On the employment front, the survey noted that helping firms to keep up with demand was a further solid expansion of staffing levels, with the rate of job creation ticking up from that seen in August and remaining above the series average. “The rise in employment in the service sector was the steepest since August 2022 as companies responded to higher new orders, often through the hiring of workers on a permanent basis. Meanwhile, the pace of jobs growth in manufacturing eased. As well as taking on extra staff, Indian manufacturers also expanded their purchasing activity during September. This helped to support a further marked increase in stocks of inputs as suppliers continued to deliver goods in a timely manner,” the survey noted.

The flash PMI records 75-85% of the total 800 Purchasing Managers Index survey responses by services and manufacturing firms received each month. The final manufacturing PMI headline figure for September will be released on October 1 and is projected to remain at 56.5. The services and composite PMI will be released on October 4.