MUMBAI: Driven by manufacturing on the back of robust export orders as the tariff deadline loomed, business activity accelerated in July with the headline flash manufacturing index rising to 60.7 from 58.4 in June. While services PMI had touched a 10-month high of 60.4 in June on sharp upturn in new businesses, manufacturing index for that month was on a 14-month high at 58.4 driven by export orders.
The jump is significant as it came despite business confidence falling to its lowest mark since March 2023, and employment growth moderated to its weakest pace in 15 months.
Flash PMI signals expansion as manufacturing activity picks up climbing to 60.7 while the flash services PMI eased to 59.8 in July, according to the HSBC’s flash purchasing managers’ index or PMI compiled by S&P Global, Thursday.
The PMI is an economic indicator that measures overall business activity across manufacturing and services tracking production, new orders, employment, supplier performance, and inventories, based on responses from purchasing managers.
A reading above 50 signals growth, while below 50 indicates contraction, and a score of 50 points to no change in activity. Pranjul Bhandari, the chief economist at HSBC India, said the flash composite PMI remained healthy in July at 60.7 and this strong performance was bolstered by growth in total sales, export orders, and output levels.
Manufacturers led the way, recording faster rates of expansion than their peers in the services space, she added. Meanwhile, inflationary pressures continue to heat up as both input cost and output charges rose in the reporting month.“ The rise in PMI is significant as it comes in spite of the fact business confidence fell to its lowest mark since March 2023, while employment growth moderated to its weakest pace in 15 months," she said.
Also, services sector eased to 59.8 in July down from 60.4 in June. While services activity continued to grow, the pace of expansion softened, though it remained sharp by historical standards, she said. However, companies are optimistic about output growth over the next 12 months even though the overall sentiment slipped to its lowest level since March 2023, weighed down by concerns over price pressures and rising competition for new work.
Survey participants reported demand growth from across Asia, Europe and the US. While growth in new export orders accelerated in the services sector, it slowed among goods producers. Employment rose at the weakest pace in 15 months, marking a notable slowdown in hiring overall and especially in the services sapce. The seasonally adjusted index for the services economy fell by nearly four points, reflecting this deceleration.
July data indicated a rise in input cost pressures across the private sector. Surveyed companies reported higher prices for aluminium, cotton, food items such as cooking oil, eggs, meat, and vegetables, as well as rubber, steel, and transportation. While the overall rate of input inflation was solid, it remained below the long-term average.
Service providers saw a sharper increase in input costs than manufacturers. Selling price inflation also accelerated as companies passed on increased costs to customers. The rate of output charge inflation exceeded the long-run trend, with stronger price hikes observed in both manufacturing and services.