Indian Economy Facing A Reality Check? Flash PMI Flags Slowing Business Activity In June

India’s private sector growth slowed in June as softer demand and rising costs weighed on business activity, according to HSBC Flash PMI data.

The softer outlook also led companies to reduce purchases of raw materials and limit inventory building.

Source : ABPLIVE AI

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• Cost pressures eased, though business confidence declined significantly.

India’s business activity lost some momentum in June as companies received fewer new orders and demand for goods and services softened, according to the latest HSBC Flash PMI survey.

The HSBC Flash India Composite PMI Output Index fell to 57.4 in June from 59.3 in May. Although the reading still points to growth, it marks the slowest pace of business expansion since March. Businesses across both manufacturing and services reported that weaker demand and higher operating costs made it harder to maintain the strong growth seen in recent months.

"Private sector activity eased a bit in June, while growth in manufacturing output softened as inventory-building lost steam after a few hectic months," Pranjul Bhandari, Chief India Economist at HSBC, said.

She said new export orders remained resilient and the order-to-inventory ratio improved, indicating continued strength in manufacturing activity. Input cost pressures also eased, with costs rising at the slowest pace in five months.

Slower Demand Hits Business Activity

Companies continued to receive new orders in June, but the pace of growth slowed compared with previous months. Both manufacturers and service providers reported a moderation in demand.

Some businesses said it had become more difficult to attract new customers and win fresh orders. Rising fuel prices, gas shortages and increased competition also added to the challenges.

As demand cooled, companies expanded their operations at a slower pace, resulting in the weakest overall growth in business activity in three months.

Export Growth Remains Positive

Demand from overseas markets remained supportive, although growth also slowed in June.

Service companies recorded stronger growth in international business, while manufacturers saw the slowest increase in export orders since March 2023.

Overall, exports continued to rise, but the pace of growth was the weakest in nearly two years, reflecting softer demand in some markets.

Hiring Activity Slows Down

The slowdown in new business affected hiring decisions during the month.

Companies continued to add workers, but the pace of recruitment was the slowest in six months. Both manufacturing and services firms reported weaker hiring activity.

Businesses also indicated that their existing workforce was largely sufficient to handle current workloads, with pending work remaining mostly unchanged.

Cost Pressures Ease

Many companies reported higher expenses for items such as fuel, food, gas, metals and utilities.

However, the rise in costs eased for the third straight month and was the slowest since January. Manufacturing companies continued to face stronger cost pressures than service firms.

Businesses also raised prices charged to customers at a slower pace. Some companies chose not to increase prices because demand remained weak and competition was intense.

Confidence Weakens Among Businesses

Companies still expect business activity to improve over the next year, but confidence weakened in June.

The overall level of optimism fell to its lowest point since January. Among manufacturers, confidence dropped to its weakest level in almost four years.

The softer outlook also led companies to reduce purchases of raw materials and limit inventory building. Stocks of finished goods declined during the month.

The HSBC Flash India Manufacturing PMI slipped to 54.5 in June from 55.0 in May, reaching a three-month low.