India’s business activity slowed to 9-month low in September as demand cools: HSBC PMI report

Growth in India’s business activity slowed to a nine-month low in September despite services sector jobs rising at the fastest pace in two years. 

The headline HSBC Flash India Composite* Output Index – a seasonally adjusted index that measures the month-on-month change in the combined output of India’s manufacturing and service sectors – dipped to 59.3 in September from 60.7 in August. 

The latest HSBC ‘flash’ PMI® survey, compiled by S&P Global, signalled ongoing strong growth across the Indian private sector during September, although both output and new orders rose at the slowest rates in 2024 so far.  

Meanwhile, employment continued to rise solidly amid improved business confidence. Rates of both input cost and output price inflation were relatively muted, with service providers raising their charges at the slowest pace in just over two-and-a-half years, the report added. 

Pranjul Bhandari, Chief India Economist at HSBC, said, “The flash composite PMI in India rose at a slightly slower pace in September, marking the slowest growth observed in 2024. Both the manufacturing and service sectors exhibited similar trends during the month. Nevertheless, the pace of growth remained well above the long-term average. Growth in new orders moderated by a touch in September, but hiring levels rose at a faster pace, supported by improving business confidence.” 

Companies were generally able to keep on top of workloads in September with backlogs of work rising only fractionally and at the slowest pace in just over two-and-a-half years. 

A solid expansion of staffing levels was seen across sectors with the rate of job creation ticking up from August and remaining above the series average. The rise in employment in the service sector was the steepest since August 2022 as companies responded to higher new orders often through the hiring of workers on a permanent basis, the report added. 

“In fact, the rise in employment in the service sector was the steepest since August 2022, as companies responded to robust growth in new orders. On the price front, input cost inflation rose at a slightly quicker pace in September. Rates of increase in output charges slowed in both sectors, with manufacturers experiencing a larger slowdown, implying a bigger reduction in their margins,” Bhandari said. 

Indian manufacturers also expanded their purchasing activity during September. This helped to support a further marked increase in stocks of inputs as suppliers continued to deliver goods in a timely manner. On the other hand, stocks of finished goods decreased to the largest extent in four months, in part due to a slowdown in growth of production.  

The pace of input cost inflation in the Indian private sector remained relatively muted in September, despite rising slightly from that seen in August. The marginal increase in costs were attributed to higher prices for raw materials and electricity. The rate of output price inflation remained similarly muted in the latest survey period, coming in just below the series average.  

Despite the softer expansions in both output and new orders in September, companies in India remained strongly optimistic that business activity will increase over the coming year.