India's private sector growth slows to 10-month low in December
What's the story
India's private sector activity witnessed a major slowdown in December, marking its weakest growth in 10 months. The decline was primarily due to a dip in new orders, affecting both manufacturing and services sectors. Despite the economy still being in expansionary territory, the slowdown and a nearly stagnant job market indicate that domestic demand is cooling down. This has resulted in an overall decline from the highs seen earlier this year.
PMI decline
PMI drops to 58.9, indicating softer activity
The HSBC Flash India Composite Purchasing Managers' Index (PMI), a key indicator of private sector activity, fell to 58.9 in December from November's reading of 59.7. The latest figure is still well above the neutral mark of 50 that separates growth from contraction but indicates softer activity since February. The slowdown was due to weaker growth in new orders, a key demand indicator, despite new export business reaching a three-month high on demand from the US, UK and Middle East.
Sector slowdown
Goods-producing sector experiences slowest growth in 2 years
The slowdown was most pronounced in the goods-producing sector, which saw its health improve at the slowest rate in two years. The Manufacturing PMI fell to 55.7 from November's 56.6 while the services activity index also dipped to 59.1 from last month's reading of 59.8. Despite an expansion in output, employment generation stalled at its weakest level since early-2024 with companies reporting current workforce numbers were sufficient for their workloads leaving staffing levels broadly unchanged.
Sentiment dip
Business sentiment drops to lowest level since July 2022
The hiring pause reflects a sharp dip in optimism with business sentiment dropping for the third consecutive month to its lowest level since July 2022. The decline was mainly seen in the service sector where muted year-end optimism overshadowed expectations of future growth.