India Private Sector Activity Sees Marginal August Recovery as Manufacturing Slows Further

The HSBC Flash India Composite PMI Output Index rose to 54.6 in August from 54.3 in July. The July reading was a 52-month low. Although the August data showed a marginal improvement, it remained the second-weakest reading since March 2022, indicating that overall private sector growth continued to be subdued.

The composite index tracks month-on-month changes in the combined output of India’s manufacturing and services sectors.

Indian companies reported a slightly stronger increase in new orders in August. However, the pace of growth remained below the trend recorded in recent years, with challenging market conditions, competitive pressures and subdued customer demand limiting expansion, the report said.

The improvement in overall private sector activity was largely driven by the services sector. The HSBC Flash India Services PMI Business Activity Index rose to 54.5 in August from 53.3 in July.

The services sector recorded a modest recovery after registering its weakest increases in business activity and new work in 53 months in July. Both business activity and new work growth strengthened in August.

Manufacturing, however, continued to lose momentum. The HSBC Flash India Manufacturing PMI fell to 52.9 in August from 53.5 in July, marking its third consecutive monthly decline.

The manufacturing output index also weakened, falling to 54.9 in August from 56.4 in July.

According to the report, the manufacturing sector recorded its weakest increases in production and new orders in five years.

Manufacturing companies increased their purchasing activity during August, broadly in line with higher overall new order volumes. However, the pace of growth in input purchases slowed to its weakest level in more than five years.

The slower increase in input purchases also contributed to softer rates of accumulation in both pre-production and post-production inventories.

The third consecutive monthly decline in the manufacturing PMI to 52.9 pointed to a historically subdued improvement in overall factory conditions.

The August data showed divergent trends across the two major sectors of India’s private economy, with services activity gaining some momentum after a weak July, while manufacturing growth slowed further.