Indian economic activity grows faster in June, with job creation at an 18-year high: PMI
Robust gains in both sectors at the end of the first fiscal quarter meant a strong start for the Indian economy this fiscal, after growing 8.2 percent last year – the fastest among major countries – led in part by a booming manufacturing sector .
HSBC’s flash India Composite Purchasing Managers’ Index, compiled by S&P Global, rose to 60.9 in June, up from last month’s reading of 60.5.
That was almost three years above the 50 level that separated growth and contraction on a monthly basis.
“The composite flash PMI rose in June, supported by gains in both manufacturing and services sectors, with the former recording a faster pace of growth,” said Maitreyi Das, global economist at HSBC.
The industrial index showed bigger gains to 58.5 from 57.5 in May, while the dominant services sector index rose slightly this month to 60.4 from 60.2, adding to the continued expansion in India even as the global economy slows down.
This was supported by strong growth in industrial production and orders as well as corporate profits at service companies.
New export orders rose for the 22nd month in a row in June and remained robust, although the pace slowed slightly after last month’s record growth.
Strong demand has pushed companies to hire more people, with overall employment rising at the fastest pace since April 2006. Job creation among manufacturers was greater than in the services sector.
Boosting employment will remain the biggest challenge for the government of Narendra Modi, which was elected to a rare third term earlier this month, a Reuters poll showed.
Meanwhile, business price increases have moderated since May, which bodes well for the outlook for retail inflation. Input cost increases in the services sector fell to the lowest level in four months, while the pace of increases in prices charged to customers remained largely unchanged.
“Input cost inflation eased slightly in June but remained high, with panelists citing increases in labor and material costs. The output price index suggests manufacturing companies were able to pass on higher costs to customers,” Das added.
“Optimism about future production weakened in June, but remained above historical average.”
Even as business optimism weakened to its lowest level in three months, the outlook for the year ahead remained positive as companies expect production gains based on pipeline proposals, efficiency gains and forecasts for favorable exchange rates.