India's Private Sector Hits Four-Month Growth Peak

In December, India's private sector experienced its strongest growth in four months. Boosted by manufacturing and services, job creation hit new heights. The HSBC Composite Output Index reflected robust expansion, fueled by domestic and international demand. Despite easing cost pressures, firms increased selling prices.

The HSBC Flash India Composite Output Index showed notable growth in India's private sector for December, with a rise to 60.7 from November's 58.6, marking the strongest expansion since August 2024. This surge in activity was driven by both manufacturing and services sectors, as new business inflows and job creation accelerated.

The HSBC Flash India Manufacturing PMI climbed to 57.4 in December from 56.5 in November, indicating better business conditions bolstered by increased production, new orders, and employment, supported by strong domestic demand. The services sector continued its growth momentum, with its Business Activity Index rising to 60.8 in December from 58.4 the previous month, evidencing resilience and increased sales and backlogs.

December saw a significant expansion in workforce numbers, with job creation hitting a new survey high. Employers hired permanent and temporary staff to keep up with rising demand, as work backlogs grew the fastest since May 2024.

HSBC economist Ines Lam stated that the slight rise in the manufacturing PMI was largely due to gains in production, new orders, and employment, signaling a pickup in economic growth momentum. Rising input costs led manufacturers to raise selling prices, with the output price index reaching its highest since February 2013.

Demand for Indian goods and services soared to the highest level since July, driven by both domestic and international orders. Manufacturing outpaced services in export order growth, while business optimism reached a new peak since September 2023.

While cost pressures eased slightly from September's peak, input costs for food, freight, and labor rose, prompting firms to increase selling prices at a slower rate than November's near 12-year high. Manufacturers also increased input purchases, benefiting from better vendor performance, although finished goods stocks shrank to meet demand.

(With inputs from agencies.)