India’s private sector economy recorded stronger business activity in September, according to HSBC Flash PMI data released on Wednesday.

The HSBC Flash India Composite PMI Output Index rose to 56.5 in September from 54.3 in August, signalling a faster expansion in private-sector activity. Manufacturing and services companies both reported higher output, with manufacturers leading the upturn. New orders also increased at a faster pace, supporting solid job creation, the PMI data showed.

At the same time, inflationary pressures eased, while business confidence strengthened.

The latest PMI reading pointed to the sharpest expansion in private-sector activity since June and pushed the index back above its long-term average.

“Activity in the private sector gained momentum, led by stronger manufacturing. Output and new domestic orders rose at faster rates. Renewed tensions in the Middle East have once again led firms to build buffers to manage the uncertainties,” said Pranjul Bhandari, Chief India Economist at HSBC.

Companies also increased their input purchases at a faster pace. The finished-goods inventory index reached an 11-and-a-half-year high. Manufacturers, however, faced stronger price pressures as output-price inflation accelerated, indicating that companies continued efforts to protect profit margins, Bhandari said.

Indian private-sector companies also recorded faster growth in total new business during September.

Demand strengthened across both manufacturing and services, although manufacturers saw a more significant acceleration. Goods producers recorded sales growth above that of service providers, with manufacturing sales reaching a seven-month high.

Service providers said stronger marketing efforts helped increase new orders. Survey responses highlighted higher demand for property-related services, transport services and new travel bookings.

Manufacturers also reported stronger demand for aluminum products, electronic items, food, pharmaceutical goods and new product models, the data showed.

Employment across the private sector also grew at a solid pace in September. Companies continued to expand their workforce as output and new orders maintained their growth momentum.

Both manufacturers and service providers added staff, with employment growth rates remaining broadly similar across the two sectors.