India's private sector growth hits 4-year low in July
What's the story
India's private sector growth has hit a four-year low in July, mainly due to a sharp slowdown in the services sector. The HSBC Flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 54.3 from June's 57.1. Despite the decline, it remained above the crucial 50-mark that separates growth from contraction.
Sectoral impact
Services sector severely hit
The services sector, a key driver of India's recent growth, has been severely hit.
The business activity index for this sector plummeted to 53.1 from June's 57.4, the lowest since February 2022.
This decline was attributed to tough market conditions, order cancellations, and fewer client inquiries.
Despite the downturn in services, export orders provided some relief with international sales growing at their fastest pace since March.
Manufacturing performance
Manufacturing sector remained relatively stable
The manufacturing sector remained relatively stable, with its factory activity index easing to a four-month low of 53.9 from 54.2.
This was due to strong demand from overseas markets that helped output and new orders continue expanding at a stronger pace.
However, the overall trend still pointed toward a slowdown in private sector growth as services continued to lag behind other sectors of the economy.
Business outlook
Businesses optimistic about future growth
Despite the slowdown, businesses remained optimistic about future growth.
Firms continued to hire for the seventh consecutive month, anticipating that demand would hold up.
However, companies were also facing challenges from rising input costs due to higher fuel, labor, materials, and transportation expenses.
This has led some of these costs being passed on to clients with output price inflation hitting a three-month high in July's surveys.