Flash PMI for India launched, January services print at 6-month high of 61.2

India’s services Purchasing Managers’ Index (PMI) likely rose to a six-month high of 61.2 in January, with the gauge of manufacturing sector activity at a four-month high of 56.9.

The manufacturing PMI was at an 18-month low of 54.9 in December 2023, while the services PMI stood at 59.0. The composite PMI, meanwhile, rose to 61.0 in January – the joint-highest in six months – from 58.5 in the last month of 2023.

This is the first time that flash PMIs are being released for India and comes in the wake of HSBC sponsoring the index compiled by S&P Global.

“The Eurozone, France, Germany, the UK, the US, Japan, and Australia already have flash PMIs. And we are delighted to bring the flash PMI to India today to add it those group of significant economies that we currently monitor,” Luke Thompson, a managing director at S&P Global Market Intelligence, said on January 24.

The flash PMIs for January are being released a week ahead of the final number. The manufacturing PMI for India will be released on February 1, just half an hour before Finance Minister Nirmala Sitharaman presents the interim Budget for 2024-25 at 11am. Meanwhile, the services and composite PMIs will be released on February 5.

“Essentially, the flash PMI is an early look at what the final PMI numbers will be showing…just to give an even earlier indication of business conditions of the Indian economy,” Thompson said, adding that the flash number was based on 75-85 percent of the responses S&P Global typically receives for the final PMI number. He further said that the flash PMI is a “very reliable guide” to the final number, with the absolute difference between the two being 0.5 on average.

“There will be some occasions where the divergence might be slightly greater if there has been a particular event that’s happened towards the end of the month. But generally the differences are not large, which means the flash data are giving a reliable signal of the final data,” Thompson said.

Commenting on the flash PMI for January, Pranjul Bhandari, Chief India Economist at HSBC, said the Indian economy grew at a faster pace in January, thanks to stronger manufacturing output and more robust services activity.

“New orders rose at a faster pace than a month ago, and within that, international orders were stronger than before,” she added. According to the PMI report, the increase in international orders was the fastest since October, with overseas demand for goods growing more than services.

Input prices for service providers rose the fastest in January since August 2023, while that for manufacturers increased at a pace similar to November and December.

“All of last year, when we saw input prices rise, they were on the back of commodity prices rising, like oil. But right now, the rise in input prices seems to be coming more from labour costs. And some of the service providers mentioned that the overtime they are having to pay to some of their labourers to work hard to be able to cater to this new demand is leading to higher wage costs,” Bhandari said.

On the prices charged to consumers, the total rate of charge inflation cooled to a 10-month low, with some respondents noting that they had not raised prices to boost sales.