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Services have edged up India’s flash composite purchasing managers’ index (PMI) to 61.7 in May, as against 61.5 in April. More importantly, the month under discussion saw the steepest expansion in private sector jobs since September 2006.
The HSBC Flash India PMI is compiled by S&P Global from a survey of around 400 manufacturers and 400 service providers. The respondents are stratified by sector and workforce size, based on contributions to the gross domestic product (GDP). While services comprised over 53 per cent in gross value added (GVA), manufacturing is 17.7 per cent.
Pranjul Bhandari, Chief India Economist at HSBC, said the composite PMI ticked up in May, marking the third strongest reading in close to 14 years, supported by a sharp acceleration in the service sector.
“Although manufacturing sector growth slowed slightly in May, driven by a slowdown in new orders and production, the rise in output in the manufacturing industry continued to surpass that in the service economy. Additionally, the latest data showed strength in new export orders for both sectors, which rose at the fastest pace since the series started in September 2014,” she said.
On job creation, the survey report highlighted that the persistently strong increases in new orders had underpinned job creation across the private sector. Employment has risen on a monthly basis throughout the past two years, with the expansion in May the sharpest since September 2006. An added factor for job growth was the intensification of capacity pressures, it said.
Services shine
According to the report, although the manufacturing industry continued to lead the growth in sales and output, it was the service economy that accelerated the overall economic expansion. The other positive developments highlighted include a series record rise in aggregate exports, and a notable improvement in business confidence. On the price front, a faster increase in input costs pushed up the prices charged for Indian goods and services, it added.
The report pegged flash services PMI at 61.4 in May as against 60.8 in April. Services firms recorded a sharp increase in business activity, the steepest in four months, while factory production rose at the slowest pace since February. Nevertheless, manufacturing continued to record a stronger rate of growth than services. Flash manufacturing PMI — a single-figure snapshot of factory business conditions calculated from measures of new orders, output, employment, supplier delivery times, and stocks of purchases — slipped from 58.8 in April to 58.4 in May, showing the weakest improvement in three months but strong by historical standards.
The survey also recorded optimism among the respondents. “The level of optimism about the year-ahead increased to its highest in over 11 years, resulting in firms increasing their staffing levels. However, higher input costs in both sectors led to further margin squeezes, particularly for service providers,” Bhandari said.
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