India business growth accelerates in September, PMI rises to 56.5

India’s private-sector business activity accelerated in September as stronger demand lifted both manufacturing and services, although slower export growth and subdued hiring tempered the recovery.

The HSBC Flash India Composite Purchasing Managers’ Index rose to 56.5 in September from 54.3 in August, its highest level since June. The reading was also above the 54.4 median forecast in a Reuters poll. A PMI reading above 50 indicates expansion.

The rebound came after business growth had slowed during the previous two months. However, the broader pace of expansion remained weaker than in the previous quarter. The composite PMI averaged 55.1 in the July-September quarter based on the September flash reading, compared with 58.2 in April-June.

India’s economy expanded 7.8 per cent in the April-June quarter, beating expectations.

Manufacturing, services pick up

The manufacturing PMI rose to 55.7 in September from 52.8 in August, its strongest reading in seven months. Factory output and new orders grew at faster rates, while manufacturers resumed hiring after a marginal fall in employment in August.

The services PMI also improved, rising to 55.8 from 54.1.

However, export demand remained a weak spot. Overall new export orders grew at their slowest pace in 33 months. A modest improvement in manufacturing exports was offset by weaker growth in services exports.

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Hiring in the services sector also lost momentum, keeping overall employment growth subdued despite the stronger expansion in business activity.

Cost pressures ease

Input-cost inflation eased to its lowest level since January, driven mainly by the services sector. The moderation offered some relief to businesses, although selling-price inflation was broadly unchanged.

This suggests that the easing in input costs had yet to translate into meaningful relief for consumers.

Business confidence about the year ahead also improved, reaching a four-month high.