PMI Data Reveals a 13-Month High for India’s Business Activity in May, Saluting a 61.2 Surge in the Services Sector
India’s Private Sector Sees Notable Growth in May
In May, India’s private sector experienced significant growth, with the Composite PMI business activity index rising to 61.2, marking a 13-month peak. This figure, reported on Thursday from preliminary data collected by S&P Global, shows an increase from April’s index of 59.7. The growth observed is the most substantial since April 2024, largely fueled by advancements in the services sector.
Although there was a slight decline in growth momentum within the manufacturing sector, service providers reported their fastest output increase in 14 months. Survey participants noted a robust influx of new business, both domestically and from international markets, which contributed to rapid expansions in business activities and employment rates. This month also saw an uptick in business confidence for the first time since January.
Regarding inflation, the HSBC Flash PMI data indicated that input costs and output charges have risen at the fastest rate since late 2024. Pranjul Bhandari, Chief India Economist at HSBC, commented that “India’s flash PMI signifies yet another month of strong economic performance. While the growth in production and new orders among manufacturing firms remains resilient, there is a slight cooling compared to April’s figures. Notably, a substantial rise in employment—particularly within the service sector—indicates healthy job creation accompanying the expansion in both manufacturing and service sectors across India.”
Manufacturing Consistency
The HSBC Flash India Manufacturing PMI, representing a weighted average of new orders, output, employment, suppliers’ delivery times, and stock indices, showed a minor change, recording 58.3 in May compared to April’s 58.2, reflecting stability and an improvement in the health of the sector.
Comparison of Services and Manufacturing Sectors
While producers of goods reported the slowest output increase in three months during May, service providers indicated the highest growth since March 2024. At the composite level, the overall growth observed was the fastest in over a year. Companies attributed this expansion to strong demand, technological investments, and capacity increases. However, some firms expressed concerns that competition, price pressures, and the India-Pakistan conflict negatively affected their operations.
In line with the output trends, new order growth picked up in the services sector but slowed for goods producers. Given the scale of India’s service economy, total sales rose at the quickest rate since April 2024. The report revealed that order books benefited from a surge in international demand for Indian goods and services, resulting in the highest rate of export growth in a year. The acceleration in non-domestic sales within the service sector reached its peak in 11 months, effectively countering the slowdown in manufacturing.
Update on Employment
The S&P Global release emphasized that ongoing job creation allowed companies to manage their workloads efficiently in May. The employment rate not only continued to rise but also reached a new record since December 2005. Companies recruited both full-time and part-time staff on permanent and temporary contracts. Several firms noted that these hiring efforts contributed to increased operational costs in May, alongside raw materials, which were also recognized as a source of inflationary pressures. Throughout the private sector, the rate of input cost inflation reached a five-month high, with this rise being widespread across both manufacturing and service sectors. Prices for Indian goods and services escalated at their fastest pace in six months, with manufacturing firms experiencing the most significant price increase in over 11 years. Participants in the survey stated that strong market demand made it easier to transfer higher costs to customers.
