MUMBAI: After a record run, primarily driven by the front-loading of exports to the US and also the early arrivals of the festive season, which had ramped up the business activity to record highs in the previous months, decelerated a tad to hit a six-month low in November at 59.9, from 60.4 in October, shows a private survey of seasonally adjusted reading.
According to the HSBC flash composite output index, as measured by the purchasing managers’ index or PMI that measures the combined performance of the manufacturing and services sectors, fell to 59.9 in November from 60.4 in October, marking a six-month low.
However, companies are still hopeful of output expansion in the year ahead, though the overall confidence level was at its lowest since mid-2022.
Despite the blip, overall growth remains strong, with the index staying well above the neutral mark. A reading below 50 indicates contraction and above that number shows expansion.
This seasonally adjusted index, which tracks on-month changes in the combined output of these two sectors, indicates a slower rate of expansion for the reporting month, which is mainly because factory production grew more slowly, the weakest since May. Some manufacturers got fewer new orders, while service sector activity grew faster than in the previous month.
"The flash manufacturing PMI eased, though the improvement in operating conditions remained healthy. The rise in new export orders matched those seen in October. However, overall new orders came in soft, indicating that the GST-led boost may have peaked. Cost pressures eased considerably, and so did prices charged," the chief economist at HSBC India Pranjul Bhandari said Friday.
The manufacturing PMI dropped from 59.2 in October to 57.4 in November. New orders for factories increased at a weaker pace, while demand for services improved, she said, adding overall sales growth is still strong but the slowest in six months, partly due to difficulties getting new business and heavy rains in some areas.
While exports remained steady, services slowed down in the reporting month. While international demand rose, but at the weakest rate since March, due to tough global competition and cheaper alternatives abroad, services slowed down considerably, pulling down the overall reading.
Meanwhile, this also had its impact on new hiring. Though jobs growth continued it was at the slowest pace in over 18 months as weaker demand and lower workloads reduced hiring. The report notes that a combination of slower sales growth and falling backlogs reportedly stymied job creation across the private sector midway through the third financial quarter.
On the other hand, input costs and selling prices rose again, but inflation was mild and the weakest in over five years. Businesses still expect output to grow going forward, supported by pricing and expansion efforts, but overall confidence is the lowest since mid-2022.