India’s Business Activity Hits 3 Month High In September But Exports Remain A Concern

India’s private-sector business activity accelerated in September as stronger domestic demand lifted both manufacturing and services, although slower export growth and subdued hiring tempered the recovery.

The HSBC Flash India Composite Purchasing Managers’ Index (PMI) rose to 56.5 in September from 54.3 in August, reaching its highest level since June and beating the 54.4 median forecast in a Reuters poll. A PMI reading above 50 indicates expansion.

The rebound came after business growth slowed for the previous two months. However, the broader pace of expansion remained weaker than in the previous quarter. The composite PMI averaged 55.1 in the July-September quarter, based on the September flash reading, compared with 58.2 in April-June.

India’s economy expanded 7.8 per cent in the April-June quarter, beating expectations.

The manufacturing PMI climbed to 55.7 in September from 52.8 in August, marking its strongest reading in seven months. Factory output and new orders increased at faster rates, while manufacturers resumed hiring after a marginal decline in employment in August.

The services PMI also strengthened, rising to 55.8 from 54.1, as activity and demand improved.

However, export demand remained a weak spot. Overall new export orders recorded their slowest growth in 33 months. A modest improvement in manufacturing exports was offset by weaker growth in services exports, limiting the broader recovery.

Employment also remained relatively subdued. While manufacturers increased hiring after August’s marginal decline, hiring momentum in the services sector weakened, keeping overall employment growth restrained despite stronger private-sector activity.

There was some relief on the cost front. Input-cost inflation eased to its lowest level since January, mainly because of moderation in the services sector. However, selling-price inflation was broadly unchanged, suggesting that lower input costs had yet to translate into significant relief for consumers.

Business sentiment about the year ahead also improved, with confidence reaching a four-month high. The improvement indicates that companies remain relatively optimistic about future activity despite slower exports and restrained employment growth.

The September PMI data therefore point to a recovery in private-sector momentum, but the quarter’s average remains below the previous quarter’s level, highlighting the uneven pace of India’s economic expansion.