India’s composite flash PMI rises for first time after three quarters

After softening for three quarters in a row, the Composite flash Purchasing Managers’ Index (PMI) rose at a faster pace in February, showing an uptick in the growth of the private sector in the current quarter, says an HSBC report. Composite flash PMI came in at a strong 60.6, higher than last month’s reading of 57.7, led by a sharp acceleration in services sector activity. “Manufacturing flash PMI, too, reported a healthy acceleration, albeit at a soft pace than last month. January and February combined data suggests that after softening for 3 quarters in a row, the PMI composite index may tick higher in the current quarter,” HSBC said.

It said rapid restocking around the world continues to lift India’s new goods export orders. Meanwhile, recent currency depreciation may prove to be another shot in the arm for the fast-growing services exports sector. “Input prices eased, improving margins; we expect a 25 bps rate cut in the April policy meeting,” the HSBC report said. The February flash India PMIs provide an advance indication of the final manufacturing, services and composite PMI data for the ongoing month, and are released approximately one week prior to the release of the final PMI indices, HSBC said. The flash PMI is typically based on approximately 80-90 per cent of total PMI survey responses that are received each month, all of which are used in the final release, it said.

“Rapid restocking around the world continues to lift new export orders, which rose at an elevated pace for manufacturers. Firms responded to an elevated order-to-inventory ratio by raising employment,” it said. “Service providers, too, reported a sharp rise in new export business orders, and we believe professional services exports are playing a big role here. Indeed, in the January trade data release, services exports came in higher than goods exports,” it said. The recent depreciation of the rupee against the dollar (down 3.2 per cent since October) will likely make services exports more competitive, and could well be another shot in the arm for this sector, it said.

Input prices eased while the output prices continued to climb higher, improving margins, especially for goods producers. The HSBC analysis of 100 activity indicators suggests that for the quarter ending December, about 65 per cent of the indicators were growing positively. This number was 55 per cent in the September quarter, indicating that activity in December quarter of 2024 is likely to have recovered from the September slump. Early trends in January indicate that more than 60 per cent of the indicators continue to grow positively. All of these numbers are below the 75 per cent levels which was observed in the quarter ending June 2024.