The manufacturing PMI data showed factory output rising at a strong rate in the latest survey period. Consequently, the HSBC Composite Output Index (covering manufacturing and services) posted 55.3 in May, up from 53.8 in the previous month.
“Behind the latest expansion of service sector activity was a sustained increase in new work. The pace of new business growth was marked, albeit slower than the long-run trend. This, coupled with a strong expansion of new orders placed at manufacturing firms, meant that overall new work increased sharply in May,” a press release from HSBC India Services PMI states.
Commenting on the India Services PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said:
“Following last week's release of the weaker than expected Q1 GDP number, the May PMI reading for the service sector was more encouraging. Activity re-accelerated, new orders came in at a faster pace, and employment continued to increase. As a consequence businesses were more optimistic about the outlook for the coming 12 months. However, the inflation readings for input and output prices accelerated again and remain high by historical standards. While the more backward-looking GDP numbers suggest rising growth risks and pressures on the RBI to cut rates, these numbers suggest that the case may not necessarily be that clear-cut and, certainly, that there is no room for aggressive monetary policy easing over the near term."