New Delhi: With the significant growth in the services sector, India's business activity witnessed a robust expansion in May this year, recording the third strongest reading in close to 14 years. Besides, exports also rose at a record pace in the same month with the sharpest job addition rate in nearly 18 years, a private survey showed on Thursday. As per the survey, the HSBC's flash India Composite Purchasing Managers’ Index or PMI, put together by S&P Global, stood at 61.7 this month from April's 61.5, marking the 34th consecutive month above the 50-level, which separates growth from contraction. “The flash services PMI index hit a 4-month high of 61.4 this month, up from April's 60.8, while the preliminary manufacturing PMI showed a tad weaker growth than last month, dipping to 58.4 from 58.8,” the survey showed.
Commenting on the survey, Pranjul Bhandari, chief India economist at HSBC, said that 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,” Bhandari said.
“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,” he added.
However, the latest data highlighted further signs of strength in new export orders across both the manufacturing and service sectors. “Panellists noted gains from many parts of the world, including Africa, Asia, Australia, the Americas, Europe and the Middle East. Total new orders meanwhile rose substantially, with the pace of expansion matching that seen in April and therefore among the fastest since mid-2010,” the survey said.
The survey further noted that manufacturing companies continued to record a quicker increase than their services counterparts, despite posting a slowdown in its rate of growth. “Amid reports of higher labour and material costs, input prices across the private sector rose at the fastest pace in nine months. There were mentions that prices for chemicals, food, plastics, electronic components and electrical items had risen,” it said. “Aggregate selling prices likewise rose to a greater extent in May. The rate of inflation was below that seen for input costs, though outpaced its long-run average. The faster increase in charges was recorded in the manufacturing industry, contrasting with the trend seen for input prices,” the survey added.
