Overview
India's private-sector expansion lost significant steam in July, with the flash composite Purchasing Managers' Index (PMI) compiled by S&P Global and published by HSBC slipping to 54.3 from 57.1 in June. The reading fell well short of a Reuters poll median expectation of 57.7 but remained above the 50 threshold that separates growth from contraction.
Services drag, manufacturing steadier
The services sector was the principal drag on overall activity. The services business activity index contracted to 53.1 in July from 57.4 in June, marking its weakest reading since February 2022. Survey respondents pointed to challenging market conditions, cancellations of orders and fewer client enquiries as weighing on receipts of new work.
Manufacturing was relatively more resilient but also softened. The factory activity index eased to 53.9 in July from 54.2 in June, a four-month low. Output and new orders in manufacturing continued to expand at a stronger clip, underpinned by healthy demand from overseas markets.
Exports and hiring provide limited support
A brighter element in the surveys was export orders, with international sales growing at the fastest rate since March. Firms also sustained hiring for a seventh consecutive month, signalling that businesses remain optimistic about near-term demand holding up despite the cooling momentum.
Costs and prices
Companies reported that input costs rose at a quicker pace in July. Firms cited higher fuel, labour, materials and transportation expenses as contributors to elevated cost pressures, and some businesses passed on part of these increases to clients. As a result, output price inflation reached a three-month high.
Outlook and implications
The July survey results indicate that the unusually strong momentum observed over the past two years is starting to wane. A more pronounced slowing in services - which has been the main engine of recent growth - means the economy is becoming more reliant on manufacturing. That shift matters because manufacturing has not shown signs of accelerating enough to fully offset the services slowdown.
Key facts at a glance
- Composite PMI: 54.3 in July, down from 57.1 in June.
- Services business activity index: 53.1 in July, down from 57.4; weakest since February 2022.
- Manufacturing activity index: 53.9 in July, down from 54.2; four-month low.
- Exports: International sales grew at the fastest pace since March.
- Hiring: Firms continued to recruit for a seventh consecutive month.
- Costs and prices: Input costs rose faster; output price inflation at a three-month high.