India’s Private Sector Growth Slows In May; Export Orders Hit 19-Month Low

India's private sector maintained strong growth momentum in May, though the pace eased slightly as new orders, export demand and employment gains all moderated, according to the HSBC Flash India PMI compiled by S&P Global released today.

The Composite PMI Output Index, which tracks combined activity across manufacturing and services, came in at 58.1 for May, marginally down from 58.2 in April. Any reading above 50 signals expansion, and May's figure marked yet another robust month for the broader economy despite a softening at the edges.

Services continued to outpace manufacturing, with the Services Business Activity Index edging up to 58.9 from 58.8 in April. The manufacturing side told a more mixed story — the Manufacturing PMI Output Index slipped to 56.6 from 56.9, while the headline Manufacturing PMI fell to 54.3 from 54.7, its second-weakest reading in nearly four years. Goods producers pointed to competitive pressures, softer demand conditions, travel disruptions and the ongoing conflict in the West Asia as factors weighing on new business.

Export orders were a particular soft spot. The expansion in international sales across the private sector was the weakest in 19 months, with goods producers recording their second-slowest rise in overseas orders since September 2024.

Cost Pressures at Multi-Year Highs

Input price inflation at the composite level reached its second-highest point in nearly three years in May, driven largely by manufacturers who reported sharply higher costs for energy, food, fuel, gas, iron, leather, oil, plastics, rubber, steel and transportation. For the manufacturing sector specifically, input cost inflation was the steepest since July 2022.

Firms attempted to pass on some of these costs to customers but held back considerably. Output charges rose at their slowest pace since January, well below the rate of input price inflation — a sign that competitive conditions are limiting pricing power.

On the hiring front, service providers added staff at the fastest rate in nearly a year, while job creation at manufacturers softened somewhat from April. Business confidence, though retreating to a three-month low, remained well above its long-run average.

Pranjul Bhandari, Chief India Economist at HSBC, noted that inventory building continued to support the manufacturing reading, with finished goods stocks rising for a second consecutive month and purchase stocks increasing at their fastest pace in three months.