Flash PMI climbs to 7-month high in February

Manufacturing activity rose to a five-month high in February, while services growth accelerated to a seven-month high, the HSBC Flash India Composite PMI Output Index showed.

The seasonally adjusted index that measures the month-on-month change in the combined output of India’s manufacturing and service sectors rose from 61.2 in January to 61.5 in February.

The rise in aggregate output was the quickest since last July, while new orders expanded at the joint-fastest pace in seven months.

“The pace of acceleration in the output of India’s manufacturers and service providers, combined, was at a 7-month high in February. Encouragingly, new export orders rose sharply, particularly for goods producers,” Pranjul Bhandari, chief India economist at HSBC, said.

Inflation in goods and services receded to the weakest in a year, even as input prices increased at the slowest pace in three-and-a-half years.

“Producers were able to do both – lower the rate of increase in output prices and improve margins,” Bhandari said.

Participants in the survey attributed the upturn to buoyant demand conditions, investment in technology, efficiency gains, expanded clientele and favorable sales developments.

International markets again bolstered companies’ order books, as seen by the fastest expansion in new export work since last September.

Despite growth of new orders, private sector companies in India refrained from recruiting more workers during February. Payroll numbers were unchanged since January, thereby ending a 20-month sequence of job creation.

Manufacturers also indicated a general lack of pressure on the capacity of their suppliers, with average lead times broadly stable.

Services companies, on the other hand, noted a stronger increase in cost burdens than manufacturers, although slowdowns were registered in each case.

Where expenses ticked higher, panelists mentioned greater labor and material costs, especially iron, plastics and steel.

Business confidence, however, slipped from January’s four-month high, but remained indicative of a robust degree of optimism towards growth prospects.

The HSBC Flash India PMI is compiled by S&P Global using answers from surveys sent to about 400 manufacturers and 400 service providers. These panels are organized by industry type and company size, reflecting their impact on gross domestic product.