India's Service Sector Logs Third-Strongest Output Growth Since 2010, Check Out Flash PMI Estimates For May

The HSBC Flash India Services PMI Business Activity Index stood at 61.4 in May, whereas the final services PMI data for April stood at 60.8, backed by sharp growth

The HSBC Flash India Manufacturing PMI estimates for May stood at 58.4, slightly lower than the final PMI figure of 58.8 in April, as production increased at the slowest pace since February

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The HSBC Flash India PMI estimates for May revealed that the private sector clocked the third-strongest output in the month seen since July 2010. The Flash India Services PMI Business Activity Index stood at 61.4 in May, whereas the final services PMI data for April stood at 60.8. The PMI data for March was slightly higher at 61.8.

Flash India Manufacturing PMI Estimates

On the other hand, the manufacturing sector clocked strong growth in terms of sales and output in the month. The HSBC Flash India Manufacturing PMI estimates for May stood at 58.4, slightly lower than the final PMI figure of 58.8 in April. 

The data signalled strength in new export orders across both the sectors. The survey noted, "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."

The Manufacturing PMI index provides an insight into the factory business conditions and is calculated from new orders, output levels, employment data, supplier delivery times, and stocks of purchases. The slip in the estimates for May represented the weakest growth in the sector's health in three months, however, this growth remained memorable by historical standards. 

Flash Composite PMI Estimates

The HSBC Flash India Composite PMI Output Index for May stood at 61.7, while the final data for April was 61.5. This marked the third-strongest expansion rate in almost 14 years. The Flash Composite PMI index is seasonally adjusted and helps nderstand the monthly changes in the overall output of the manufacturing and service sectors in the country. 

The index revealed that growth remained strong only in July 2023 and March 2024. This increase was explained by several factors such as efficiency gains, robust intakes of new work, demand strength, and successful advertising by the survey respondents.

The HSBC Flash India PMI data is compiled by S&P Global from responses to questionnaires shared to survey panels of nearly 400 manufacturers and 400 service providers. The Flash data is calculated from 80 to 90 per cent of the overall responses and is intended to provide an accurate early insight of the final data for the month.

Expert Comments

Elaborating on the survey findings, Pranjul Bhandari, Chief India Economist, HSBC, noted, "The composite PMI ticked up further in May, recording 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. 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."