Flash PMI Suggests Squeeze In Corporate Margins Aggravated In March

The squeeze in corporate margins aggravated in March with input prices rising fast than output prices even as growth in overall economic activity slowed marginally, HSBC flash Purchasing Managers Index released on Monday showed.

The input costs rose at a marked and accelerated rate in March even as output inflation slowed, pushing up operating expenses of private sector businesses.

Although some firms tried to share the additional cost burdens with clients, competitive conditions limited the extent to which these were passed on. Prices charged for Indian goods and services rose at the weakest rate since February 2022, the data showed.

“The margin squeeze on manufacturers intensified as input price inflation ticked up while factory gate prices rose at the weakest rate in a year,” HSBC Chief India Economist Pranjul Bhandari said.

Cost pressures were stronger in the service economy, despite a slowdown in the sector and an acceleration in manufacturing. 

The overall growth in India's private sector slowed down marginally in March from the previous month, the data showed. Rates of growth softened from February, though they remained well above their long-run averages.

The flash Composite PMI, a weighted average of the Manufacturing Output Index and the Services Business Activity Index, slowed marginally to 58.6 in March from 58.8 in February. The slowdown reflected a softer increase in services activity.

Manufacturing was the bright spot in March. The flash Manufacturing PMI Output Index jumped to 60.6 in March, its highest level since July 2024, from 58.1 in February.

The flash Manufacturing PMI increased to 57.6 in March from 56.3 in February, signalling a notable improvement in operating conditions. Three of the five main sub-components of the index - output, new orders and stocks of purchases – rose from last month. 

However, the overall growth rate in services moderated sharply with flash Services PMI easing to 57.7 in March from 59.0 a month ago.

The order book volumes at Indian private sector companies continued to be supported by international sales, though new export order growth eased to a three-month low amid new tariff announcements by US President Donald Trump.

Business confidence remained strongly positive, though the overall level of sentiment slipped to a seven-month low in March. Fierce competition featured as the main worry among survey participants. Both manufacturers and service providers were slightly less upbeat towards output prospects than in February.

The India PMI is compiled by S&P Global from responses to questionnaires sent to survey panels of around 400 manufacturers and 400 service providers. The flash PMI is based on around 80-90% of the total responses. The final data for Manufacturing PMI will be released on April 2 and Services PMI on April 4. 

Past data suggests flash PMI has on an average overestimated Manufacturing PMI by 0.4 and Composite PMI by 0.5. Going by the past trends, the moderation in March could be more slightly more severe.

The PMI indices vary from 0 to 100 with a reading above 50 indicating an overall increase compared to the previous month and below 50 an overall decrease. 

The PMI suggests a continuous slide in India’s economic growth. The average Composite PMI in January-March at 58.4 was the lowest in five quarters.