HSBC Flash India PMI Strengthens To Three-Month High In November

The HSBC Flash India Composite Output Index—a seasonally adjusted index to measure combined manufacturing and services output—rose to 59.5 in November, from a final reading of 59.1 in October. The moderate expansion was sharpest in three months as services output picked up and manufacturing performance exceeded expectations.

Manufacturing firms saw orders expand faster than services firms for the third month in a row. Job creation was more pronounced in the latter though, fastest since the survey began in December 2005.

"Services saw a pick-up in growth, while the manufacturing sector managed to outperform expectations, despite a marginal slowdown from its October final PMI reading...Meanwhile, price pressures are rising for raw materials used by manufacturers, as well as food and wage costs in the services sector," said Pranjul Bhandari, chief India economist at HSBC.

HSBC Flash India Manufacturing PMI was marginally down at 57.3 in November from 57.5 in October. Aggregate new orders continued to rise during the middle of third fiscal quarter, with exports driving sales. Manufacturing firms registered a slightly stronger increase in international sales than their services counterparts. Orders gained across the globe, including Asia, Europe and the Americas.

Rise in new business gains and export sales boosted output across private sector economy in the country, as per the HSBC Flash PMI. However, this strengthening of operating conditions were coupled with intensifying cost pressures and the steepest upturn in selling prices since February 2013.

Companies ramped up hiring efforts due to rising backlogs on the back of increase in capacity pressures, amid overall improvement in business. Outstanding business volumes expanded moderately, but were quickest since May. In turn, firms pursued further recruitment drives in November.

Cost pressures, across Indian private sector, intensified to their highest level since August 2023, with price hikes seen across for a range of raw materials, including aluminium, cotton, leather and rubber. Service providers were particularly concerned over greater food costs and wage bills.

With rise in operating costs, private sector companies hiked their selling charges again during November. The rate of inflation was sharp and the fastest in just under 12 years. Firms suggested that demand strength allowed them to pass on additional cost burdens to their clients.

Although service providers felt cost burdens rise more than manufacturers, rates of charge inflation were broadly similar across the two sectors and both saw an acceleration since October.

Meanwhile, business confidence rebounded across India. The Future Output Index was at a six-month high and nearly six points above its long-run average. Private sector players suggested that marketing efforts and new client enquiries bode well for the business outlook, with positive demand trends also expected to underpin growth over the course of the coming 12 months.