India’s business activity surges in June on strong demand, record export orders, PMI shows

India's private sector activity accelerated sharply in June as companies ramped up production to meet surging domestic and international demand, according to a survey released on Monday that showed record export growth and robust hiring.

The HSBC Flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, jumped to a 14-month high of 61.0 this month from 59.3 in May, exceeding a Reuters poll forecast for a modest lift to 59.4.

The 50-mark separates growth from contraction and the latest data showed nearly four years of sustained expansion.

Services gained momentum with the activity index rising to 60.7 from May's 58.8 - the strongest since August last year - while manufacturing gained pace thanks to robust output. Its PMI climbed to 58.4 in June from 57.6.

"New export orders continued to fuel private sector business activity, especially in manufacturing," noted Pranjul Bhandari, chief India economist at HSBC.

This expansion was driven by favorable demand as composite new orders grew at the fastest pace in 11 months. Goods producers experienced a more pronounced upturn than services firms.

International sales saw a remarkable rise, with overall new export business at the highest since the data started to be collected in September 2014. However, service providers recorded slower growth in export business compared to last month.

"The combination of robust global demand and rising backlogs prompted manufacturers to increase hiring," added Bhandari.

Manufacturing employment growth reached a peak not seen since the series began over two decades ago. Service providers also continued adding jobs at a solid pace, albeit slower than in May.

Meanwhile, overall price pressures eased slightly with input cost inflation softening to a 10-month low, allowing firms to limit price hikes to remain competitive. That resulted in a slower rate of output price rises from May's six-month high.

That comes after data showed inflation eased to an over 6-year low in May, allowing the Reserve Bank of India to focus on supporting economic growth and cutting interest rates amid rising uncertainty from U.S. trade tariffs. 

Despite positive private sector performance, business confidence dipped to its lowest in just over two years. Manufacturers expressed slightly improved optimism while service providers tempered their expectations for the coming year.