Business activity in India continued to grow strongly in August. Despite a slight slowdown in manufacturing expansion, the slowing in the manufacturing sector was offset by the impressive performance of the service sector. India's private sector output grew for the 37th consecutive month, reaching a historically high level. Price pressure is also easing, and the rise in input costs and sales prices is moderate.

A report released by S&P Global and Commerzbank Hamburg (HCOB) on Thursday, August 22 shows:

The initial value of the composite PMI is 60.5, slightly lower than the previous value of 60.7, but it is still far above the long-term trend level (54.6), indicating a significant expansion rate of commercial activity in India;

The initial value of the service sector PMI was 60.4, higher than the previous value of 60.3;

The initial value of the manufacturing PMI was 57.9, lower than the previous value of 58.1, and manufacturing expansion slowed slightly.

India's private sector output grows for 37th consecutive month, and cost pressure continues to rise

In terms of international sales, India's service sector showed stronger growth than manufacturing in August. On a comprehensive level, the growth rate of new export orders is the weakest since April, but it is still at a high level in the past ten years.

In August, employment in India grew rapidly, and the growth rate was about the same as in July. The number of people employed in the service sector continued to grow, enabling overall employment to expand for the 27th consecutive month. The increase in employment has also helped the manufacturing industry to clear backlogs of orders.

On the price side, the price inflation rate of commodity producers reached its highest point in nearly 11 years, while that of service providers has slowed. Overall, although the price growth rate has slowed since July, the latest sales price growth is still strong, above the long-term average.

In August, India's private sector output increased for the 37th consecutive month. Although India's private enterprises are facing increased signs of capacity pressure, such as a further increase in backlog orders, the trend is divided at the industry segment level: commodity producers' unfulfilled orders fell for the first time in nearly a year, while service providers achieved growth for the 32nd month in a row, and the backlog of orders grew moderately, the lowest level since February.

However, cost pressure on the private sector continued to rise in August, and construction maintenance, food, labor, raw materials, and transportation costs all increased. Although India's overall inflation rate fell to its lowest point in six months, it is still moderate.

To cope with the shortage of raw materials and ensure that production can meet growing demand, manufacturers purchased more raw materials and semi-finished products in August. As supplier delivery times were further shortened, procurement inventory grew at the fastest rate in 19 years.

Looking ahead, private companies in India remain optimistic about production in the coming year, and demand conditions are expected to remain favorable. Meanwhile, new customer inquiries and marketing efforts also supported positive market sentiment in August, although this optimism weakened due to inflation and competition issues.

Pranjul Bhandari, chief Indian economist at HSBC, stated:

“India's initial composite PMI declined slightly in August, but it is still far above the historical average. Although the growth of new orders in the manufacturing industry has slowed to its lowest level since February, the pace of expansion is still strong, indicating continued strong demand and good market conditions.

However, despite a slight slowdown in input prices, manufacturing output price inflation rose to an 11-year high, indicating that manufacturers are passing on higher prices to customers.”