New Delhi: The pace of recovery in India’s private sector activity appears to have slowed down a bit in May, with the latest HSBC flash PMI showing modest growth in output, new orders, exports and employment. Data released by S&P Global on Thursday showed that although business activity continued to expand, the rebound after March’s sharp recession was not much stronger.
The HSBC Flash India Composite PMI Output Index rose to 58.1 in May from 58.2 in April. The services PMI business activity index rose to 58.9 from 58.8, but this was offset by weak manufacturing activity. The manufacturing PMI output index fell to 56.6 from 56.9, while the headline manufacturing PMI fell to 54.3 from 54.7. All readings remained above 50, indicating expansion compared to the previous month, but the direction of the change suggests April’s recovery did not gain much momentum.
The loss of speed was most visible in demanding situations. New business from manufacturers and service providers grew at a slow pace, leading to a decline in overall growth. For manufacturers, new orders grew at the second weakest rate in nearly four years. Companies cited competitive pressures, weak demand, travel disruptions and the Middle East war as factors impacting sales.
Manufacturing, which led the surge in April, lost some momentum in May. Factory output continued to rise, but at its second-slowest pace since mid-2022, only ahead of March. “Manufacturing activity moderated due to a subdued rate of expansion in output and new orders, while growth in new export orders moderated significantly. Nevertheless, the manufacturing PMI remained in line with its long-term average, supported by continued inventory build-up,” said Pranjul Bhandari, chief India economist at HSBC.
New export orders in the private sector grew at the slowest pace in 19 months. Goods producers posted their second-slowest growth in international sales since September 2024, ahead of February 2026.
Despite rising cost pressures, demand softened. Input price inflation at the mixed level rose to its second highest level in almost three years, led by manufacturing, where input costs rose at the fastest pace since July 2022. Firms reported higher prices for energy, food, fuel, gas, iron, leather, oil, plastics, rubber, steel and transportation. However, companies were cautious in passing on these costs. Selling prices rose at the slowest pace since January and at a much slower rate than input costs, indicating that companies continued to absorb some of the increase rather than passing it on to customers.
There was no sign of capacity pressure, with backlog slipping slightly below the neutral 50 mark. Nevertheless, supported by confidence in future activity, companies continued hiring. Employment in the services sector grew at the fastest pace in almost a year, while job creation in the manufacturing sector slowed. Overall business confidence remained above its long-term average, but slipped to a three-month low.
Manufacturers also continued to build inventory while suggesting precautions. Purchasing activity and purchasing stocks rose at the fastest pace in three months, while finished goods inventories increased for the second consecutive month. Although moderate, the increase in finished goods stocks was the strongest in 11 years. This inventory build-up helped support the headline manufacturing PMI, but it also underscores the caution in the latest data – companies are still preparing for uncertain circumstances despite slowing demand growth.