With the help of the dominant services industry, business activity in India has seen an impressive upward trend in May, according to a survey that also showed exports rising at a record pace and the sharpest job addition rate in nearly 18 years.
According to HSBC’s flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, the index slightly increased to 61.7 from April’s final reading of 61.5. This marks the 34th consecutive month that the PMI has stayed above the 50-level, indicating sustained growth.
The composite PMI ticked up further in May, recording the third strongest reading in close to 14 years, supported by a sharp acceleration in the service sector,” Pranjul Bhandari, chief India economist at HSBC was quoted by Reuters as saying.
The services PMI index also rose to a four-month high of 61.4 in May from 60.8 in April. The manufacturing PMI showed robust growth as well, although it dipped slightly to 58.4 from 58.8.
The strong demand was bolstered by new business in the services industry, which grew at the fastest pace since January, along with rising manufacturing output and new orders. Robust international demand led to overall exports expanding at the fastest rate since the start of the series in September 2014, marking the second time this year that export growth set a new high.
This surge in business activity has significantly boosted business confidence for the coming 12 months. In the services sector, optimism reached its highest level since May 2013, while manufacturers’ confidence was the strongest in over nine years. Contributing to this positive sentiment was a marked improvement in job creation across the private sector, which saw the sharpest increase since September 2006. Specifically, jobs in the services sector were added at the fastest pace in 21 months.
Meanwhile, input prices at a composite level rose at a nine-month high and companies raised selling prices at a faster pace in May than in April. However, not all of the increase in input costs was passed on to clients this month. “Higher input costs in both sectors led to further margin squeezes, particularly for service providers,” added Bhandari.
High costs could slow the downward path of cooling retail inflation, putting pressure on the Reserve Bank of India to keep interest rates elevated at its meeting in June before eventually cutting them next quarter, an earlier Reuters poll showed.
With inputs from agencies.
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India’s economic momentum accelerates in May as exports rise at record pace
