Falling from 59.3 in May to a preliminary reading of 57.4 in June, the HSBC Flash India PMI 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 – signalled a sharp rate of expansion that was nevertheless the weakest since March.

According to panel members, cost pressures and softening demand conditions curbed the latest upturn in business activity.

“Private sector activity eased a bit in June. New export orders remained resilient and the order-to-inventory ratio ticked up, pointing at resilient manufacturing activity down the line. Input costs across the private sector rose, but at the slowest pace in five months,” said Pranjul Bhandari, Chief India Economist at HSBC.

Private sector companies continued to report month- on-month increases in their expenses, which they often associated with greater material prices. 

In particular, panellists cited higher chemical, food, fuel, gas, metal and utility costs. That said, the overall rate of inflation eased for the third successive month to its lowest since January. Cost pressures remained more pronounced in manufacturing than in services, said the PMI data.

Export trends were mixed in June, as faster growth in the service economy contrasted with the weakest increase at manufacturers since March 2023.

Companies remained confident of an increase in output over the coming 12 months relative to present levels.