India's manufacturing sector experienced its weakest performance in nearly five years during July, with the HSBC India Manufacturing PMI falling to 53.5 from 54.2 in June. According to the latest data from S&P Global, the reading marked the lowest level since August 2021 and below the long-run series average of 54.2, indicating a significant deterioration in factory-floor conditions. The rate of growth in new orders was the second-weakest in over four years, while job creation weakened for the third straight month, with the pace of increase the slowest in the ongoing 29-month streak of employment growth. The PMI readings above 50.0 signal expansion in activity, but the latest figures represent a sharp deterioration from previous months.
India's services sector experienced its weakest growth in nearly four years during July, with the Services PMI Business Activity Index falling to 53.3 from 57.4 in June. According to the HSBC India Services PMI released on Wednesday, the reading marked the weakest level since February 2022, when the index stood at 51.8, indicating a significant loss of momentum across the sector. The Services PMI Business Activity Index fell to 53.3 in July from 57.4 in June, marking the weakest growth rate in close to four-and-a-half years. The slowdown was driven by softer domestic demand, intense competition, fewer client enquiries and order postponements, as reported by HSBC. Despite the overall weakness, new export orders rose at a solid pace in July and grew faster than total sales, with service providers reporting stronger demand from clients in the United Arab Emirates, the United Kingdom and the United States. International demand also softened from June, though export orders continued to outperform overall new business growth, with the latest data showing new business growth posting the softest expansion in close to four-and-a-half years.
New business inflows increased at their weakest pace since February 2022, with survey respondents attributing the slowdown to fierce competition, fading demand, softer market conditions and the postponement of orders. According to HSBC, only finance and insurance recorded faster growth in output and sales among the four broad areas of the services economy covered by the survey. Despite the overall weakness, new export orders rose at a solid pace in July and grew faster than total sales, with service providers reporting stronger demand from clients in the United Arab Emirates, the United Kingdom and the United States. International demand also softened from June, though export orders continued to outperform overall new business growth, with the latest data showing new business growth posting the softest expansion in close to four-and-a-half years.
Services companies increased hiring for the seventh straight month, with the pace of job creation picking up from a six-month low in June, though the improvement was modest. Around 92% reported no change, as reported by HSBC, while only 6% of surveyed firms reported an increase in payroll numbers. Input cost inflation softened for the fourth consecutive month and fell to its lowest level since January, with firms reporting higher fuel, labour, material, technology and transportation expenses. Consumer services recorded the fastest cost inflation among surveyed segments, though the rate was its lowest since the beginning of 2026. Companies raised selling prices at the fastest pace since April as they passed additional cost pressures on to clients, with the rate of price increases remaining below the long-term average. Hiring showed a moderate rebound, while profit margins improved as input costs softened and firms increased their selling prices.
Business confidence declined to a seven-month low in July, reflecting concerns about future demand and market conditions and declining for a fourth consecutive month. According to HSBC, the slowdown was led by services, while manufacturing output growth improved marginally. Despite the overall challenges, firms nevertheless cited expectations of stronger demand and an increase in tourism as reasons for optimism about future business activity. The decline in business confidence, despite continued expansion, highlights the sector's challenges with fierce competition and fading client appetite weighing on growth prospects, though companies remain cautiously optimistic about future prospects. Limited bookings and weak sales led to a reduction in outstanding business, with the pace of decline in backlogs reaching its fastest level in close to five years.
