Services sector boosts business activity as manufacturing growth slows in Nov

Business activity gained momentum in November, driven by an upswing in the services sector, even as manufacturing activity grew slower than last month, according to an HSBC flash survey released on Friday.

The survey, which quoted responses from 400 manufacturers and as many service providers, indicated that new business gains and export sales boosted output growth across India's private sector economy in November amid intensifying cost pressures and the steepest upturn in selling prices since February 2013.

The HSBC Flash India PMI, compiled by S&P Global, said job creation was more pronounced in the services sector during the month.

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The HSBC Flash India Services PMI Business Activity Index stood at 59.2 in November, up from 58.5 in October. However, the HSBC Flash India Manufacturing PMI Output Index fell to 60.2 from 60.4 in October.

The HSBC Flash India Composite PMI Output Index, combining manufacturing and services, increased to 59.5 from 59.1 the previous month.

The final numbers for November will be updated in December.

Manufacturing slowdown

Although slightly lower than the previous month, the HSBC Flash India Manufacturing PMI—a composite index reflecting factory business conditions based on metrics such as new orders, output, employment, supplier delivery times, and inventory levels—indicated a significant improvement in the sector's overall health.

"Aggregate new orders continued to increase midway through the third fiscal quarter, with demand strength cited as the main determinant of growth," the survey said.

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"The overall rate of expansion was substantial and the quickest since August. For the third month, goods producers noted a faster upturn than service providers," it added.

The 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—has been in growth territory (above 50) for over three years.

"India’s flash composite PMI moderately expanded from a final reading of 59.1 in October to 59.5 this month. Services saw a pick-up in growth, while the manufacturing sector outperformed expectations despite a marginal slowdown from its October final PMI reading," said Pranjul Bhandari, chief India economist at HSBC.

"Strong end-demand and improving business conditions pushed services sector employment to the highest level ever recorded by this indicator since December 2005. Meanwhile, price pressures are rising for raw materials used by manufacturers, as well as food and wage costs in the services sector," Bhandari added.

The $10 trillion economy

India envisions building a $10 trillion economy within the next decade, with manufacturing poised as the key growth driver.

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Priority sectors include semiconductors, electronics, electric vehicles, renewable energy, and defence manufacturing.

To realize this vision, the central government has significantly increased capital expenditure, focusing on strengthening infrastructure, generating jobs, and accelerating manufacturing growth.

"Finally, November data showed a rebound in business confidence across India. The Future Output Index was at a six-month high and nearly six points above its long-run average," the survey said.

"Survey members suggested that marketing efforts and new client enquiries bode well for the business outlook, with positive demand trends also expected to underpin growth over the coming 12 months," it added.