HSBC Flash India Composite PMI Rises To 58.6 In October

Posting 58.6 in October, the HSBC Flash India Composite Output Index — a seasonally adjusted index that measures the month-on-month change in the combined output of India's manufacturing and service sectors — rose to 58.6 in October, from a final reading of 58.3 in September. The acceleration in growth was supported by quicker increases in factory production and services activity.

The HSBC Flash India Manufacturing PMI recovered from September's eight-month low of 56.5 to 57.4 in October. Registering well above the series trend, the latest figure was consistent with a substantial improvement in the health of the sector.

Indian businesses indicated a sharp increase in new order intakes during October. The expansion, which was mostly linked to positive demand trends, was also stronger than that recorded in September.

Manufacturing also led the upturn in sales despite rates of growth quickening in both segments. Latest data revealed that part of the upturn in total new orders was fuelled by an improvement in international demand for Indian goods and services. Rates of expansion in export sales accelerated at manufacturing firms and their services counterparts.

October data showed a mild pick-up in capacity pressures among Indian companies, as outstanding business volumes rose to the greatest extent in three months. Trends diverged at the sub-sector level, however, as a marginal decline in backlogs at goods producers contrasted with the joint fastest accumulation at service providers since May.

Hiring activity was more pronounced in the service economy. The latest increase in employment was sharp and the quickest in 18-and-a-half years. Jobs still rose at a marked pace in the manufacturing industry too, supporting the best upturn in payroll numbers at the composite level since February 2006. Anecdotal evidence indicated that part- and full-time workers had been taken on, with both permanent and temporary contracts offered.

Input cost inflation at the composite level picked up to the strongest in three months, amid marginally quicker increases at both goods producers and service providers. According to survey participants, chemicals, eggs, meat, packaging, steel and vegetables all rose in price. Yet, the overall rate of cost inflation remained below the survey average.

With demand conditions remaining favourable and cost pressures intensifying, private sector companies in India lifted their own selling prices at the start of the third fiscal quarter. The rate of charge inflation was above its trend, and climbed to a three-month high. Notably, manufacturers posted the sharpest upturn in 11 years.

Trends for business confidence were mixed at the sub-sector level. Manufacturers were at their most upbeat since July, while sentiment somewhat faded at services companies. For the private sector overall, the degree of optimism receded but remained above its long-run average.