Factory business conditions fell to a three-month low in August while the services firms saw a slightly quicker business activity, according to a flash survey by HSBC Holdings Plc.
The manufacturing purchasing managers’ index dropped to 57.9 in August from 58.1 in July, while the services purchasing managers’ index rose to 60.4 from 60.3 in the previous month. As a result, the composite index fell to 60.5 from 60.7 in July, the lowest reading since May.
The latest manufacturing PMI reading was nevertheless above the historical average of 54 and signalled a strong improvement in the health of the sector.
“Manufacturing firms reported the first decline in outstanding business volumes for the first time in eleven months, while service providers indicated another monthly rise. Overall, firms remain optimistic, although the level of business confidence moderated due to concerns over inflation and competition,” said Pranjul Bhandari, Chief India Economist at HSBC.
Companies operating across India’s private sector signalled a further increase in cost burdens during August. According to panellists, building maintenance, food, labour, raw material (e.g., iron, leather and rubber) and transportation costs rose.
Index readings for the manufacturing and service sectors were generally alike. Charge inflation climbed to a near 11-year high at goods producers, whilst softening at service providers. At the composite level, the latest increase in selling prices was solid and above its long-run average, despite softening since July.
Private sector companies in India forecast higher output levels in the year ahead, amid expectations that demand conditions will remain favourable. New client enquiries and marketing efforts also supported positive sentiment in August, which somewhat faded due to inflation and competition concerns.
The HSBC Flash India PMI® is compiled by S&P Global from responses to questionnaires sent to survey panels of around 400 manufacturers and 400 service providers.