India's private sector activity showed signs of recovery in August, with the HSBC flash India Composite Purchasing Managers' Index rising to 54.6 from July's 54.3, according to latest reports from Reuters. The reading exceeded the Reuters poll median estimate of 54.3, though it remained well below the recent average of around 60. The improvement came as a rebound in services growth offset the weakest expansion in the factory industry in half a decade. The latest data shows new orders increased slightly faster while export orders continued to grow solidly, supported by demand from markets including the US, Germany, China, Singapore and Japan. As per HSBC Chief India Economist Pranjul Bhandari, "Overall private sector output growth was broadly steady, helped by stronger services activity. Manufacturing growth weakened further in August, marking the softest improvement in five years."
The services sector, which is the dominant component of India's economy, drove the month's rebound with the headline PMI rising to 54.5 in August from a 53-month low of 53.3 in July, as reported by Business Standard. In contrast, the manufacturing sector continued its decline, with the Manufacturing PMI falling for the third consecutive month to 52.9 from 53.5, marking its lowest level since August 2021. Both goods output and new orders grew at their weakest pace in five years. The improvement was particularly notable as business activity and new orders picked up after hitting 53-month lows in July. According to S&P Global, the services sector staged a modest re-acceleration as growth rates strengthened after recording the softest upturns in business activity and new work for 53 months in July. As per HSBC, services activity and new business growth picked up after both had recorded their weakest upturns in 53 months in July. The Flash India Services PMI Business Activity Index increased to 54.5 in August from 53.3 in July, with services companies reporting a modest acceleration in business activity and new orders after experiencing their weakest expansion in more than four years in July.
Staffing in manufacturing fell for the first time in 2-1/2 years, while overall employment across India's private sector increased at the joint-fastest rate since June 2025, driven by a 15-month-high growth in services-sector hiring, according to Investing.com. Hiring was concentrated in services, while manufacturing employment declined for the first time in two-and-a-half years. Overall input cost pressures eased to a seven-month low, but firms raised their selling prices at the fastest rate since April in efforts to pass higher costs on to customers. Export orders growth also slowed from July and backlogs declined at the steepest rate in five years, though the decline remained modest. Input costs continued to rise in August, particularly for electricity, raw materials such as steel, transport and technology, as per HSBC. Despite easing input-cost pressures, companies increased their selling prices at a faster pace, with the overall rise in charges being the strongest since April. The stronger performance of services also supported employment growth across the private sector, with companies increasing hiring to meet rising demand.
Manufacturing activity moved in the opposite direction, with the Manufacturing PMI declining to 52.9 from 53.5 in July, marking its lowest level since August 2021. Despite the slowdown, manufacturing companies continued to report increases in production and new business, though purchasing activity weakened and inventories of finished products remained elevated. New orders, a key gauge of demand, grew at a slightly faster pace but remained weak compared to the long-term average, as companies cited challenging market conditions, competitive pressures and lower customer requirements as constraints, as reported by Reuters. Business confidence for the year ahead improved in August, as firms expected market conditions to strengthen over the coming year, according to the latest data. The survey was compiled by S&P Global for HSBC. Companies also became slightly more optimistic about the year ahead, with business expectations improving in both manufacturing and services compared with July, reflecting hopes of better market conditions. August marked the 61st consecutive month of growth, though it was still the second-weakest reading since March 2022, indicating that overall momentum remains subdued.
