India’s private sector activity continues to expand; PMI eases to 58.1

India’s private sector activity continued to expand in May, signalling sustained but marginally softer growth momentum. The HSBC Flash India Composite PMI eased slightly to 58.1 from 58.2 in April, according to S&P Global data.

The data showed a pickup in services activity, which was offset by a weaker rise in factory production—the second-slowest since mid-2022.

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The HSBC Flash India Manufacturing PMI slipped to 54.3 in May from 54.7 in April. This implies a slower pace of expansion in the sector. According to the S&P Global survey, demand conditions softened, particularly in export markets, where new orders saw their weakest rise in 19 months.

A reading above 50 indicates expansion in activity, while a reading below 50 signals contraction.

The data showed that the international sales growth also slowed sharply. Manufacturers continued to build inventories, with purchasing activity rising at the fastest pace in three months.

Pranjul Bhandari, chief India economist at HSBC, said, “Manufacturing activity eased marginally as the rates of expansion in output and new orders moderated, while growth of new export orders softened markedly. Yet, the Manufacturing PMI remained broadly in line with its long-run average, supported by continued inventory building. Finished goods stocks rose for a second consecutive month, and stocks of purchases increased at the fastest rate in three months. Cost pressures intensified, with input prices rising at the sharpest rate since July 2022.”

Inflationary pressures strengthened in May as the manufacturing firms experienced the steepest increase in input costs since July 2022.

Hiring activity in the private sector also increased as employment conditions remained broadly positive.