India’s private sector growth remained strong in May, but momentum eased slightly. The HSBC Flash India Composite PMI Output Index came in at 58.1, marginally lower than 58.2 in April, indicating another month of solid expansion across manufacturing and services.
The services sector continued to outperform manufacturing. The HSBC Flash Services PMI Business Activity Index rose to 58.9 in May from 58.8 in April, while the Manufacturing Output Index slipped to 56.6 from 56.9. The headline Manufacturing PMI also eased to 54.3 from 54.7, marking one of the weakest improvements in the sector in nearly four years.
Demand growth slowed across the economy. New orders, export sales, hiring activity and overall business growth all expanded at a softer pace. Manufacturers reported the second weakest growth in new business in almost four years, citing competitive pressures, weaker demand conditions, travel disruptions and the ongoing conflict in the Middle East.
Export demand weakened notably. Growth in new export orders across India’s private sector fell to its weakest level in 19 months. Manufacturers recorded one of their slowest increases in international sales since September 2024, reflecting softer global demand.
Cost pressures increased sharply during May. Input price inflation at the composite level reached its second highest level in nearly three years, driven mainly by manufacturing. Factory input costs rose at the fastest pace since July 2022, with companies reporting higher prices for energy, fuel, gas, food, iron, steel, plastics, rubber, leather, oil and transportation.
Despite rising costs, businesses were cautious about passing them on to customers. Selling prices increased at the slowest pace since January, meaning output price inflation remained much lower than input cost inflation. This suggests companies absorbed part of the higher costs to remain competitive.
Business confidence stayed positive and firms continued hiring. Service sector employment grew at the fastest pace in almost a year, while manufacturers also added jobs at a solid rate. Companies remained optimistic about future demand, helped by competitive pricing, marketing efforts and expectations of better market conditions. Manufacturers also continued building inventories, with purchasing activity reaching a three month high and finished goods stocks rising for a second straight month, recording the strongest increase in 11 years.
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