India Business Activity Rebounds to Three-Month High in September, PMI Shows

Private sector activity in India improved in September as increased demand in both manufacturing and services sectors helped composite PMI reach its highest level in three months. 

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HSBC’s flash India Composite Purchasing Managers' Index advanced to 56.5 from 54.3 in August. It marked the best level since June and exceeded median forecasts in Reuters’ poll of 54.4. 

The number above 50 indicates growth. 

The increase was widespread. 

The Manufacturing PMI index increased to 55.7 from 52.8 and reached its highest level since February because production and new orders have increased. Additionally, manufacturers added more jobs, reversing last month’s marginal decline in employment. 

Activity in the services sector increased too, with services PMI advancing to 55.8 from 54.1. 

While the latest reading marked a recovery, it could not compensate for the softer trend throughout the quarter. 

According to the September preliminary figures, the composite PMI averaged 55.1 for the quarter compared to 58.2 in April-June. It came following India’s 7.8% economic growth in the third quarter. 

External demand was less supportive. 

New export business in the services sector increased at the slowest pace in 33 months. Manufacturing exports improved modestly, but the weaker services performance pulled overall export growth lower. 

Hiring also lost some momentum in services, even as manufacturing employment returned to growth. 

On costs, businesses saw some relief. 

Overall input-cost inflation eased to its lowest level since January, led by softer cost pressures in services. Selling-price inflation, however, was broadly unchanged, suggesting that the easing in business costs had not yet translated into much relief for consumers. 

Business confidence also improved, reaching a four-month high in September. 

The latest PMI readings point to a firmer end to the quarter for India’s private sector, with domestic demand supporting both factories and services even as export growth and hiring remained less even.