India's Private Sector Growth Slows in June Amid Easing Demand
Private Sector Activity Experiences Slowdown
In June, the growth of private sector activities in India decelerated as the demand for goods and services diminished. According to the latest HSBC Flash India Purchasing Managers’ Index (PMI), companies reported a reduction in job additions and a decline in hiring momentum. The Composite PMI Index dropped to 57.4 in June from 59.3 in May. Although this figure indicates growth, it marks the slowest rate since March. Economists note that manufacturing has shown resilience despite challenges and increasing input costs.
The slowdown was evident across both manufacturing and service sectors, with growth rates reaching two- and 17-month lows, respectively. Panel members indicated that rising costs and weakening demand were significant factors affecting business activity. The HSBC Flash India PMI Composite Output Index, which adjusts for seasonal variations and tracks the month-to-month changes in output across manufacturing and services, fell from 59.3 in May to a preliminary 57.4 in June, signaling a sharp yet diminished expansion rate.
Pranjul Bhandari, Chief India Economist at HSBC, commented, "Private sector activity saw a slight easing in June. The growth in manufacturing output has softened as inventory accumulation slowed after several busy months. However, new export orders remained strong, and the order-to-inventory ratio increased, suggesting ongoing resilience in manufacturing. Input costs in the private sector rose, but at the slowest rate in five months." Despite this, firms expressed confidence in increasing output over the next year compared to current levels, although overall optimism was at its lowest since January and fell below the long-term average. Notably, positive sentiment among manufacturers dropped to its lowest point in nearly four years, leading to a reduction in purchasing activity, which grew at the slowest rate in two and a half years during June. Consequently, there was a modest rise in purchase stocks and a decline in finished goods inventories. The Manufacturing PMI also decreased to a three-month low of 54.5 in June, down from 55.0 in May.