Private sector output highest since July 2010, steepest expansion in jobs since 2006: PMI

India’s composite purchasing managers’s index that measures the month-on-month change in the combined output of India's manufacturing and service sectors, compiled by S&P Global, rose slightly to 61.7 in May from April’s reading of 61.5. This is the index’s 34th month above the 50-level that separates growth from contraction. The reading comes after services PMI index rose to four-month high of 61.4 from 60.8 in April, and manufacturing PMI dipped to 58.4 from 58.8 in April.

The index indicated the third-strongest upturn in private sector output since July 2010. May’s survey also reported the steepest expansion in private sector jobs since 2006, as well as a notable improvement in business confidence. Nevertheless, a faster increase in input costs pushed prices for Indian goods and services higher.

"The composite PMI ticked up further in May, recording the third strongest reading in close to 14 years, supported by a sharp acceleration in the service sector. Although manufacturing sector growth slowed slightly in May, driven by a slowdown in new orders and production, the rise in output in the manufacturing industry continued to surpass that in the service economy. Additionally, the latest data showed strength in new export orders for both sectors, which rose at the fastest pace since the series started in September 2014. The level of optimism about the year-ahead increased to its highest in over 11 years, resulting in firms increasing their staffing levels. However, higher input costs in both sectors led to further margin squeezes, particularly for service providers," said Pranjul Bhandari, Chief India Economist at HSBC.

The report showed robust demand, supported by new business in the services industry that grew at the fastest pace since January, as well as rising manufacturing output and new orders.

Overall exports expanded at the fastest rate since the start of the series in September 2014 due to strong international demand, setting the growth at a new high for the second time this year.

Business confidence for the coming 12 months, especially in the services sector where it was the strongest since May 2013, was high, as well as optimism among manufacturers, which was the highest in over nine years.

Underpinning the positive sentiment was an improvement in job creation across the private sector to the sharpest since September 2006. Services jobs were added at the fastest pace in 21 months.