India's private sector growth slowed to its weakest level in more than four years in July as services activity lost momentum, offsetting resilient manufacturing growth, according to HSBC's flash Purchasing Managers' Index survey compiled by S&P Global.
The HSBC Flash India Composite PMI Output Index fell to 54.3 in July from 57.1 in June, marking the weakest reading since March 2022. The figure also missed the Reuters poll median estimate of 57.7. Even so, the index remained above the 50 threshold that separates expansion from contraction.
The softer reading reflected slower growth in services amid weaker demand, order cancellations and fewer customer enquiries. Manufacturing continued to expand, supported by stronger export demand, while companies kept adding jobs despite rising cost pressures.
"Renewed tensions in the Middle East have once again resulted in firms building buffers to manage the uncertainties around the longevity of the supply-side shock. Finished goods and input inventories increased alongside a pick-up in purchasing volumes. Both output and new export orders rose, even as the overall manufacturing growth eased slightly. Price pressures firmed, with output charge inflation gathering pace and signalling a renewed push to protect margins," said Pranjul Bhandari, chief India economist at HSBC.
The survey showed new business continued to increase in July, although the pace of expansion was the weakest in nearly four-and-a-half years. Firms cited intense competition, more difficult trading conditions, shortages of key raw materials and cancellations of orders as factors weighing on activity.
Services accounted for most of the slowdown. The HSBC Flash India Services PMI Business Activity Index declined to 53.1 from 57.4 in June, its lowest level in 53 months, as businesses reported softer demand and fewer client enquiries.
Manufacturing remained relatively steady. The headline Manufacturing PMI slipped to 53.9 from 54.2, a four-month low, while the Manufacturing Output Index improved to 57.0 from 56.3, indicating factory production continued to strengthen despite a moderation in overall sector growth.
Demand from overseas markets provided support during the month. Export orders increased across both manufacturing and services, with manufacturers recording the stronger gains. At the composite level, international sales rose at the fastest pace since March.
The survey also indicated that the strong momentum seen across India's private sector over the past two years is beginning to ease, with services losing steam while manufacturing has yet to deliver a broader acceleration.
Companies continued to recruit workers for a seventh straight month in anticipation of sustained demand, although hiring remained modest. Business confidence weakened to its lowest level in six months.
Cost pressures intensified during July as businesses faced higher fuel, labour, raw material and transportation expenses. Companies also increased selling prices at a faster pace, pushing output price inflation to a three-month high.
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