Profits in the manufacturing and services sectors push the flash PMI to 60.9 in June

Business activity in June, driven by gains in the manufacturing and services sectors, strengthened further. (Representative photo)

3 minutes of reading Last updated: June 21, 2024 | 15:15 IST

Business activity in June, driven by gains in the manufacturing and services sectors, strengthened further, according to Friday’s HSBC survey. The study also indicated that the pace of job creation was the highest in over 18 years.

The global banker’s headline fast-composite Purchasing Managers’ Index (PMI) rose to 60.9 in June, up from a downwardly revised 60.5 in May, according to the global banker’s survey.

The index, which measures the month-on-month change in the total output of India’s manufacturing and services sectors, was in the growth zone for the 35th consecutive month. As since February, the growth was stronger among producers of goods than among service providers.

“At the end of the first fiscal quarter, manufacturers saw a faster improvement in the overall sector health, with the HSBC Flash India Manufacturing PMI – a single-digit snapshot of factory business conditions calculated based on indicators of new orders, production, employment, supplier delivery times and purchasing stock – rising from 57.5 in May to 58.5 in June. All five components had a greater share,” the study shows.

Maitreyi Das, global economist at HSBC, said the composite flash PMI rose in June, supported by gains in both the manufacturing and services sectors, with the former registering faster growth rates.

“New orders picked up momentum in both sectors, with faster improvement among manufacturers. Meanwhile, new export orders fell slightly in June, although the growth rate was the second fastest since the beginning of the series. As a result, pressure on productivity has increased. In June, it was clear that companies are increasing employment levels at the highest rate in over 18 years,” she added.

On the export side, new export orders rose for the 22nd consecutive month in June and remained high, although the pace slowed slightly after last month’s record growth. Strong demand prompted companies to hire more workers, with the overall number of jobs growing at the fastest pace since April 2006. More jobs were created among manufacturers than in the services sector.

Under the influence of positive demand trends, producers also purchased additional resources for use in production processes, as the growth rate of the purchase level was rapid and faster than in May. Moreover, despite the increase in purchasing volumes, suppliers were able to deliver materials on time without any problems, as evidenced by another modest improvement in supplier performance.

“Input cost inflation declined slightly in June but remained elevated, with panelists citing increases in labor and material costs. The producer price index suggests that manufacturing companies were able to pass on higher costs to customers. Overall, optimism about future production declined in June but remained above the historical average,” Das said.

Flash PMI captures 75-85 percent of the total 800 Purchasing Managers Index survey responses from service and manufacturing companies received each month. The final headline manufacturing PMI for June will be released on July 1 and is expected to rise slightly to 58.5. Services and composite PMI will be released on July 3.

First published: June 21, 2024 | 14:24 IST