HSBC Flash India Composite Output Index Climbs To 14-Month High

The HSBC Flash India Composite Output Index climbed to a 14-month high of 61.0 in June. Rising from 59.3 in May, the latest reading was consistent with a sharp rate of expansion that was well above the long-run series average.

The seasonally adjusted index measures the month-on-month change in the combined output of India's manufacturing and service sectors. Manufacturers led the upturn in business activity, though growth also picked up pace in the service economy. Rates of increase were at two- and ten-month highs, respectively, according to the press release on Monday. According to panellists, output was boosted by favourable demand trends, efficiency gains and tech investment.

The HSBC Flash India Manufacturing PMI rose from 57.6 in May to 58.4 in June, signalling the best improvement in operating conditions since April 2024. New business placed with goods producers and service providers increased at the end of the first fiscal quarter, with the faster upturn among the former. At the composite level, the rate of expansion was the strongest seen since July 2024. When explaining June's rise, survey participants remarked on healthy demand conditions and successful marketing.

Private sector firms in India signalled an unprecedented increase in new export orders during June. The sharp rise was boosted by a pick-up in growth among manufacturers. There was a slower expansion in international sales at services firms, but the rate of increase was nevertheless marked. Monitored companies reported stronger demand from Asia, Europe, the Middle East and the Americas.

June data showed an intensification of capacity pressures among Indian companies. Outstanding business volumes rose at a modest pace that was faster than in May and a tick above its long-run average. Moreover, the current sequence of rising backlogs was extended to three and a half years. Rates of accumulation were broadly similar among manufacturing firms and their services counterparts. The combination of demand strength and rising backlogs prompted Indian companies to recruit additional staff in June.

Anecdotal evidence indicated that both full- and part-time employees were hired for permanent and temporary positions. Employment growth reached a series peak in the manufacturing industry, while service providers signalled a slower upturn in job creation than in May. Meanwhile, input prices across the private sector increased only modestly during June.

Where a rise was reported, firms cited higher labour and metal (copper, iron and steel) costs. That said, the rate of inflation softened to a ten-month low and was below its long-run average. Slower increases were noted in both the manufacturing and service economies.

Although prices charged for Indian goods and services continued to increase in June, the rate of inflation retreated from May's six-month high. Service companies indicated a slower increase in output prices, while the rate of inflation in the manufacturing industry matched that recorded in May and was therefore among the highest since November 2013.

Indian companies remained strongly upbeat towards the year-ahead outlook for business activity. At the sector level, there was a mild improvement in confidence at manufacturers and a downgrade in expectations at service providers.