In August, India’s private sector expanded at the fastest rate since records began, driven by a surge in demand—particularly in the services industry—leading firms to raise prices at the quickest pace seen in over 12 years, according to a recent survey. The robust performance highlights a rapidly growing economy, though the accompanying inflationary pressures may prompt the Reserve Bank of India (RBI) to maintain tight monetary policy for an extended period.
HSBC’s flash India Composite Purchasing Managers’ Index (PMI), prepared by S&P Global, climbed to 65.2 in August, up from 61.1 the previous month and significantly surpassing the median forecast of 60.5 in a Reuters poll. This marked the highest reading since the index’s inception in December 2005 and extended the streak of expansion—indicated by readings above the 50 threshold—to 49 consecutive months.
The surge was fueled by the strongest increase in new orders in nearly 18 years, a key indicator of demand. International orders also rose sharply, with export activity growing at the fastest rate since composite data collection began in 2014.
The services sector led the expansion, with its activity index reaching a record high of 65.6. Meanwhile, the manufacturing sector showed notable momentum, with its preliminary PMI climbing to 59.8—the highest level since January 2008.
While the upswing contributed to the fastest pace of job creation since June, it also gave businesses greater leverage to adjust pricing. Facing higher labor and material expenses, companies passed these costs to consumers at the most aggressive rate since February 2013, citing sustained demand as the primary factor enabling such increases.
This rapid rise in output prices could contribute to broader inflation, potentially reducing the likelihood of an RBI rate cut in the next quarter. Despite these pressures, business sentiment remained strong, with optimism for the coming year reaching its highest level since March.
— news from Reuters
— News Original —
India’s economic boom in August fuels sharpest price hikes in over a decade, PMI shows
BENGALURU, Aug 21 (Reuters) – India’s private sector activity expanded at the fastest pace on record in August, powered by a historic surge in demand led by the dominant services sector, which allowed firms to hike prices at the fastest clip in over 12 years, a survey showed on Thursday. n nThe explosive growth paints the picture of a booming economy and the accompanying surge in price pressures is likely to compel the Reserve Bank of India (RBI) to keep its policy restrictive for longer. n nSign up here. n nHSBC’s flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rocketed to 65.2 in August from 61.1 last month and far outpacing a Reuters poll median forecast of 60.5. n nThis reading marked the highest level since the survey began in December 2005 and remained above the 50-mark that separates growth from contraction for the 49th fmonth. n nRecord expansion was underpinned by the sharpest uptick in total new orders – a key gauge of demand – in nearly 18 years. n nInternational demand was particularly robust, with new export business growing at the fastest pace since composite data collection started in 2014. n nThe services sector spearheaded this growth with its activity index soaring to a survey high of 65.6. The manufacturing sector also showed remarkable strength – its preliminary PMI rose to 59.8, its highest reading since January 2008. n nWhile this frenetic activity spurred the quickest rise in job creation since June, it also bestowed significant pricing power upon businesses. n nFaced with higher wage bills and raw material costs, companies passed on these increases to customers at the most aggressive rate since February 2013, citing strong demand as the key enabler for the mark-ups. n nSuch a sharp increase in output charges could fuel broader inflation and diminish expectations for an RBI interest rate cut next quarter. n nFirms remained overwhelmingly optimistic, with sentiment for the year ahead strengthening to its highest since March. n nReporting by Anant Chandak; Editing by Kim Coghill