HSBC Flash India PMI Rises To Three-Month High In July

India's private sector economy continued to expand in July, with the HSBC Flash India PMI data indicating stronger increases in new business intakes and output.

The headline HSBC Flash India Composite Output Index saw the strongest rate of expansion in three months as it rose to 61.4 in July from 60.9 in June, according to a release by S&P Global on Wednesday. The seasonally adjusted index measures the month-on-month change in the combined output of India's manufacturing and service sectors.

Growth strengthened at goods and service providers, with the former leading the upturn. The HSBC Flash India Manufacturing PMI was at a three-month high of 58.5 in July as compared to 58.3 in June 58.3, signalling a historically strong improvement in the health of the sector. The index is a single-figure snapshot of factory-business conditions, calculated from measures of new orders, output, employment, supplier delivery times and stocks of purchases.

Anecdotal evidence suggested that favourable market conditions and new business gains underpinned the upturn in private-sector activity. There were also mentions of buoyant client appetite, enhanced technology and a greater number of events.

New orders placed with private-sector firms in India rose sharply in July. The upturn was broadly similar to June and the quickest in three months. As was the case for output, rates of expansion accelerated in the manufacturing and service sectors.

The service economy signalled stronger growth. There was a pickup in capacity pressures among private-sector companies in India, as seen by a quicker increase in outstanding business volumes. Although slight, the pace of accumulation was above its long-run average. In turn, firms continued to hire extra staff.

Aggregate employment expanded at one of the strongest rates seen in just under 19 years of data collection. Job creation was stronger at manufacturing companies than at their services counterparts.

Amid reports of higher material, transportation and labour costs, overall input prices rose in July. The rate of inflation was solid, faster than in June and broadly aligned with its long-run average.

A pickup in cost pressures and positive demand trends, reportedly encouraged companies in India to increase their own selling prices in July. The overall rate of charge inflation was marked and the steepest in over 11 years. Consistent with the trend for input costs, the upturn in output charges was led by manufacturers.

Looking at the 12-month growth prospects, panellists were confident of a rise in business activity. Among the reasons underpinning optimism were increased advertising, buoyant demand and new client enquiries.