BENGALURU (Reuters) -India’s private sector activity expanded at the fastest pace on record in August, powered by a historic surge in demand led by the dominant services sector, which allowed firms to hike prices at the fastest clip in over 12 years, a survey showed on Thursday.
The explosive growth paints the picture of a booming economy and the accompanying surge in price pressures is likely to compel the Reserve Bank of India (RBI) to keep its policy restrictive for longer.
HSBC’s flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rocketed to 65.2 in August from 61.1 last month and far outpacing a Reuters poll median forecast of 60.5.
This reading marked the highest level since the survey began in December 2005 and remained above the 50-mark that separates growth from contraction for the 49th fmonth.
Record expansion was underpinned by the sharpest uptick in total new orders – a key gauge of demand – in nearly 18 years.
International demand was particularly robust, with new export business growing at the fastest pace since composite data collection started in 2014.
The services sector spearheaded this growth with its activity index soaring to a survey high of 65.6. The manufacturing sector also showed remarkable strength – its preliminary PMI rose to 59.8, its highest reading since January 2008.
While this frenetic activity spurred the quickest rise in job creation since June, it also bestowed significant pricing power upon businesses.
Faced with higher wage bills and raw material costs, companies passed on these increases to customers at the most aggressive rate since February 2013, citing strong demand as the key enabler for the mark-ups.
Such a sharp increase in output charges could fuel broader inflation and diminish expectations for an RBI interest rate cut next quarter.
Firms remained overwhelmingly optimistic, with sentiment for the year ahead strengthening to its highest since March.
(Reporting by Anant Chandak; Editing by Kim Coghill)
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