Media365
India’s private sector growth slowed to a three-month low in June as weaker demand weighed on both manufacturing and services activity, while companies turned more cautious on hiring and business confidence slipped below its long-run average, a closely watched survey showed on Monday.
The flash HSBC India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 57.4 in June from 59.3 in May. Although the reading remained comfortably above the 50 mark that separates expansion from contraction, it signalled a loss of momentum in the economy at the end of the second quarter.
The moderation was driven by softer demand conditions, with overall new orders rising at the slowest pace since March. Survey respondents cited heightened competition and gas shortages as factors that made it more difficult to secure new business.
“The flash PMI data indicate that India’s private sector continues to expand at a healthy pace, but growth has moderated from recent highs as demand conditions softened,” the survey showed.
Services sector records sharpest slowdown
The services sector, which has been a key driver of economic growth in recent years, recorded the sharpest slowdown. The services PMI fell to 57.3 in June from 59.8 in May, its lowest reading in 17 months.
Manufacturing activity also eased, with the factory PMI slipping to a three-month low of 54.5 from 55.0 in May. While manufacturers continued to report rising output and new orders, growth rates weakened compared with previous months.
The survey pointed to mixed trends in overseas demand. Services companies reported a slightly faster rise in international sales, suggesting continued strength in exports of business and technology services. Manufacturers, however, saw the weakest increase in new export orders since March 2023, reflecting softer global demand and persistent trade uncertainties.
Hiring momentum weakens
The slowdown in demand also translated into weaker hiring activity.
Employment across the private sector rose only marginally in June, marking the weakest increase in the current six-month period of job creation. Both manufacturing and services firms reported their slowest pace of hiring since December as companies became more cautious about expanding payrolls amid moderating growth.
Inflation pressures ease further
The survey also offered encouraging signs on inflation.
Input cost pressures eased for a third consecutive month, with overall cost inflation falling to its lowest level since January. Lower increases in raw material and operating costs helped reduce pressure on businesses.
As a result, firms raised selling prices at the slowest pace in six months. Some respondents said competitive conditions and weaker demand limited their ability to pass higher costs on to customers.
The easing in price pressures could provide further comfort to policymakers after retail inflation fell sharply in recent months and moved well within the Reserve Bank of India’s target range.
Business confidence slips
Business confidence, however, weakened during the month.
Overall sentiment slipped below its historical average, with optimism among manufacturers falling to its lowest level in nearly four years. Firms cited concerns about competitive pressures and the pace of demand growth, although many still expected output to rise over the coming year.
The latest PMI survey suggests that India remains one of the world’s fastest-growing major economies, but it also points to a more measured pace of expansion as businesses navigate softer demand conditions at home and an increasingly uncertain global environment.
