Growth in India’s private sector activity slowed to a ten-month low this September, as per the HSBC India Composite Output Index, which slipped from 60.7 in August to 58.3 last month, as factories and services players clocked a reduction in momentum.

The Composite Output Index is a combined metric based on surveys of 400 purchasing managers each in the manufacturing and services sectors, and a reading of over 50 on the index indicates an expansion.

While manufacturing sector activity mellowed in September, with factory output and sales growing at the slowest pace so far in 2024, and export orders rising at the mildest pace in 18 months, the HSBC India Services PMI [Purchasing Managers’ Index] released on Friday showed that total new business, international sales and output all rose at the slowest rates since late-2023.

While the PMI slipped from 60.9 in August to 57.7, the headline Business Activity Index fell below 60 for the first time in 2024, HSBC’s chief India economist Pranjul Bhandari noted. While she flagged the possibility of softer output growth in the coming months, Ms. Bhandari also pointed out that Services companies’ margins have likely been squeezed further, as prices charged rose at a slower pace when input cost inflation intensified.

Services export orders grew at the weakest pace so far in 2024, while overall new business intakes’ growth hit a ten-month low. Firms attributed the slower growth to fierce competition, cost pressures and changes in consumer preference, that is mainly a switch towards online services.

Among the services sectors, Finance & Insurance led widespread increases in both output and new orders, and also reported the fastest rise in selling prices. Cost pressures rose across sectors, with firms noting higher spends on electricity and food, but these pressures were more pronounced in the Consumer Services segment. Yet, Services firms hiked prices by the smallest degree in over two-and-a-half years.

Despite the moderation in growth, overall positive sentiment rose among services firms from August’s levels and some of this optimism was driven by projects that are awaiting approval and efficiency gains. Moreover, firms continued to hire full-time and part-time workers on temporary and permanent contracts, making September the fifth straight month of solid hiring.