Key Points
Services sector leads remarkable economic expansion in February
Job creation reaches unprecedented series peak
Export demand contributes significantly to growth momentum
Business confidence climbs to highest level since November
The seasonally adjusted HSBC Flash India Composite Output Index rose to 60.6, up from 57.7 in January, marking its strongest pace of growth since August 2024 and remaining well above its long-term average.
The services sector was the primary driver of this uptrend, with the HSBC Flash India Services PMI Business Activity Index climbing to 61.1 (January: 56.5), its highest level in nearly a year.
Meanwhile, manufacturing sector growth moderated slightly, with the HSBC Flash India Manufacturing PMI easing to 57.1 (January: 57.7), though still reflecting robust expansion.
A healthy acceleration in new orders and output bolstered business confidence, leading to a surge in hiring activity. The report highlighted that job creation reached a new series peak, with firms onboarding a mix of permanent and temporary workers.
This hiring spree was more pronounced in the services sector, which witnessed the sharpest uptick in new business since August 2024.
Pranjul Bhandari, Chief India Economist at HSBC, said, "Rapid restocking around the world continues to lift new export orders. A healthy acceleration in orders and output is keeping firms optimistic about the future. Input prices eased while output prices rose at a faster pace, leading to improved margins, especially for goods producers."
Export demand also contributed to this strong performance, with new international orders rising at the fastest pace in seven months. Despite competitive pressures, goods producers led the export growth, though they experienced a mild loss of momentum compared to January.
The HSBC Flash PMI data showed diverging price trends, as input cost inflation eased to a four-month low, while selling prices increased at a faster pace, particularly in the services sector. The rate of charge inflation in February was the highest in three months, reflecting businesses' ability to pass on costs to consumers.
Rising labour and transportation costs kept input prices elevated, though inflationary pressures remained moderate by historical standards. Services firms reported higher outlays on food and wages, further adding to their cost burdens.
Private sector firms remained strongly optimistic about future output, with business sentiment reaching its highest level since November 2024. This confidence was particularly pronounced in the manufacturing sector, where companies continued stockpiling raw materials to support production growth.
With favourable demand conditions, businesses also reported higher outstanding orders, indicating sustained momentum in the coming months. Service providers faced greater capacity pressures, leading to further hiring and increased backlog accumulation.
