India business activity extends robust growth streak in August

BENGALURU, Aug 22 (Reuters): India's business activity extended its robust growth streak in August as a stronger services industry offset a slight slowing in manufacturing expansion, according to a survey that indicated price pressures also were easing.
Those findings suggest India will hold on to its title of fastest-growing major economy over coming quarters despite expectations of a slowdown in the global economy.
HSBC's flash India Composite Purchasing Managers' Index, compiled by S&P Global, dipped slightly to 60.5 in July from last month's final reading of 60.7, in line with a Reuters poll forecast.
August marked over three years of expansion, the longest such run since June 2013. The 50-level separates growth from contraction.
"India's flash composite PMI slipped slightly in August, though it remained significantly higher than the historical average," noted Pranjul Bhandari, chief India economist at HSBC.
"Although new order growth for the manufacturing sector slowed to the weakest since February, the pace of expansion remained sharp, indicating continued strong demand and favourable market conditions."
The flash services PMI index rose to 60.4 this month from 60.3 in July, while a preliminary manufacturing PMI showed strong growth, albeit slightly weaker than last month. It declined to 57.9 from 58.1.
Although growth in overall demand slowed to a three-month low in August, it remained robust. However, exports expanded at the slowest rate since April, indicating weak global demand.
Overall input costs increased at their weakest pace since February and output prices rose at a slower rate compared to last month.
Even so, prices charged on manufactured goods surged at the fastest in nearly 11 years.
India's retail inflation fell in July to a near five-year low, largely due to a high-base effect, suggesting the slower pace of price rises was temporary and the Reserve Bank of India needs to be cautious.
Concerns around inflation and competition led business confidence for the coming 12 months to wane in August.
Meanwhile, India's food inflation is likely to fall in the coming months thanks to good harvests after monsoon rains replenished water levels in reservoirs, according to a government report on Thursday.
The steady progress in the southwest monsoon has supported summer sown crops, India's finance ministry said in its monthly economic report.
"Replenishing water levels in reservoirs bodes well for the current kharif (summer-sown) and upcoming rabi (winter-sown) crop production. This will further aid in reducing food inflation in the coming months," the report said.
India's retail inflation fell to a near five-year low of 3.54 per cent in July, largely due to a base effect as food prices eased from previous highs. Food inflation, which accounts for nearly half of retail inflation, eased to 5.42 per cent in July from 9.36 per cent in June.
Earlier this week, the country's central bank said India would have to adopt a more cautious approach to monetary policy if high food prices persisted and threatened to spill over into more generalised price inflation.
The government report said stronger global demand had boosted India's goods exports but imports had also risen due to strong domestic demand. India's goods trade deficit was $23.5 billion in July, higher than economists' expectations.