NEW DELHI: India’s private-sector economy likely lost some momentum in May as the West Asia conflict and softer demand conditions weighed on manufacturing and services, even as overall activity remained firmly in expansion territory, early survey data showed.
According to HSBC’s Flash India Purchasing Managers’ Index (PMI), released Thursday, growth in new orders, exports, employment and business activity eased during the month, pointing to a milder upturn in the first half of the first fiscal quarter.
The flash reading, an advance estimate ahead of final PMI data, suggests sentiment remains positive but uneven across sectors.
The HSBC Flash India Composite PMI Output Index, compiled by S&P Global, is expected to have edged down to 58.1 in May from 58.2 in April, signalling a marginal slowdown in private-sector growth. Readings above 50 indicate expansion.
Manufacturing showed signs of strain in May, with factory output rising at a slower pace—marking the second-weakest expansion since mid-2022, after March’s reading of 55.7. The HSBC Flash India Manufacturing Output Index is forecast to ease to 56.6 from 56.9 in April, signalling a loss of momentum in factory activity.
, however, continued to hold up. The Flash Services Business Activity Index is projected to edge up to 58.9 from 58.8, reflecting steady demand and resilient business confidence.
At a broader level, the HSBC Flash India Manufacturing PMI is expected to slip to 54.3 from 54.7, pointing to the second-weakest improvement in sector conditions in nearly four years, again only stronger than March.
According to Pranjul Bhandari, chief India economist at HSBC, 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 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,” Bhandari said.
The final PMI data for May will be released early in June. The flash PMI data is based on responses from around 400 manufacturers and 400 service providers.
New export orders across the private sector rose at their weakest pace in 19 months, with goods producers recording one of the slowest gains in international sales since late 2024, the survey showed. Respondents cited competitive pressures, weaker demand, travel disruptions and the war in West Asia.
Cost pressures, meanwhile, accelerated. The composite input price inflation index rose to its second-highest level in nearly three years, driven largely by manufacturing, where input costs rose at the fastest pace since July 2022. Firms reported higher prices for energy, fuel, gas, metals, plastics, rubber and transport.
Companies attempted to pass on rising costs, but with greater caution. Output price inflation eased to its weakest pace since January, widening the gap between input costs and selling prices.
Despite the cost pressure, business sentiment remained firmly positive, and stayed above its long-run average, though it slipped to a three-month low.
Inventory-building activity also strengthened. Manufacturers increased purchasing at the fastest pace in three months, while stocks of inputs rose as suppliers met delivery timelines. Finished goods inventories climbed for a second straight month, marking the strongest build-up in 11 years, according to the survey.
Employment trends diverged across sectors. added staff at the fastest pace in nearly a year, while hiring in manufacturing softened from April, though job creation remained solid in both segments.