New Delhi: The recovery in India’s private sector activity appears to have lost some momentum in May, with the latest HSBC Flash PMI showing softer growth in output, new orders, exports and employment. Data released by S&P Global on Thursday suggests that while business activity continued to expand, the rebound after March’s sharp slowdown did not strengthen further.
The HSBC Flash India Composite PMI Output Index came in at 58.1 in May from 58.2 in April. The Services PMI Business Activity Index edged up to 58.9 from 58.8, but this was offset by weaker manufacturing activity. The Manufacturing PMI Output Index slipped to 56.6 from 56.9, while the headline Manufacturing PMI fell from 54.7 to 54.3. All readings remained above 50, signalling expansion from the previous month, but the direction of change suggests that the April recovery did not gather further pace.
The loss of momentum was most visible in demand conditions. New business at manufacturers and service providers grew at a softer pace, pulling down growth at the composite level. For manufacturers, new orders expanded at the second-weakest rate in nearly four years. Companies cited competitive pressures, weak demand, travel disruptions and the West Asia war as factors weighing on sales.
Manufacturing, which led the rebound in April, lost some pace in May. Factory output continued to grow, but at its second-slowest pace since mid-2022, ahead only of March. “Manufacturing activity eased marginally as the rates of expansion in output and new orders moderated, while growth of new export orders softened markedly. Yet, the Manufacturing PMI remained broadly in line with its long-run average, supported by continued inventory building,” said Pranjul Bhandari, chief India economist at HSBC.
New export orders across the private sector rose at the slowest pace in 19 months. Goods producers recorded their second-slowest increase in international sales since September 2024, ahead only of February 2026.
The moderation in demand came even as cost pressures intensified. Input price inflation at the composite level rose to its second-highest level in nearly three years, led by manufacturing, where input costs increased 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 much more slowly than input costs, indicating that firms continued to absorb part of the increase rather than fully passing it on to customers.
There was little sign of capacity pressures, with backlogs slipping marginally below the neutral 50 mark. Even so, firms continued to hire, supported by confidence in future activity. Services employment grew at the fastest pace in nearly a year, while job creation in manufacturing softened. Overall business confidence remained above its long-run average, but slipped to a three-month low.
Manufacturers also continued to build inventories, suggesting caution remains. Buying activity and stocks of purchases rose at the fastest pace in three months, while finished goods inventories increased for the second straight month. Although moderate, the rise in finished goods stocks was the strongest in 11 years. This inventory build-up helped support the headline manufacturing PMI, but it also underlines the caution in the latest data–firms are still preparing for uncertain conditions even as demand growth slows.
