According to S&P Global’s survey data, the increase in Indian services activity extended into November, with cooling price pressures and demand resilience inducing sales growth.
India’s services activity growth declined to a one-year low with the sector’s Purchasing Managers’ Index (PMI) declining to 56.9 in November 2023 from 58.4 in the previous month, according to the data released by S&P Global on Tuesday. This is below the market forecasts of 58, pointing to the softest growth in the sector since November last year, amid a slowdown in rates of growth for both new orders and output, with new export orders rising the least in five months.
In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction.
According to S&P Global’s survey data, the increase in Indian services activity extended into November, with cooling price pressures and demand resilience inducing sales growth. Rates of both input cost and output charge inflation slipped to eight-month lows. While adding that there were softer expansions in new work intakes and output, the slowest in a year, it said that they were nevertheless sharp and well above their respective long-run averages.
Despite falling from 58.4 in October to a one-year low of 56.9 in November, the seasonally adjusted S&P Global India Services Business Activity Index pointed to a sharp increase in output across the sector. The rate of expansion was also considerably stronger than its long-run average but continued at the weakest pace since November 2022, credit to a rise in sales on the back of new client wins, demand strength, and favourable market conditions. However, there was a ‘widespread slowdowns’ in the increase in new orders, S&P Global noted.
Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said, “India’s service sector has lost further growth momentum midway through the third fiscal quarter, but we continue to see robust demand for services fuelling new business intakes and output. The current rates of expansion look very healthy when considering their respective long-run averages and the outlook for business activity remains bright in spite of optimism fading due to rising inflation expectations.”
“There was some relief for service providers in India on the cost front, with the rate of input price inflation receding to the weakest in eight months. Fewer companies hiked their own fees as a result, an aspect that might provide a further boost to demand as 2023 draws to a close. Understandably, given the lack of pressure on operating capacities signalled by stable backlog levels, services firms became more cautious when it comes to hiring. Net employment still rose in November, but the rate of job creation was marginal and the slowest in seven months,” said Pollyanna De Lima.
Similarly, S&P Global stated that international demand for Indian services improved further but in terms of new orders, growth lost momentum. “The latest increase in new export orders was moderate and the slowest since June,” it said. While this resulted in job gains, the rate of increase was the weakest since April.
Furthermore, services firms endured a further increase in their operating expenses, with labour, food, material and transportation costs reportedly rising since October. However, the overall rate of inflation softened to an eight-month low and was below its long-run average.
Slowdown in services curbs growth of private sector output
November data signalled the weakest rise in private sector activity across India for a year. However, despite falling from 58.4 in October to 57.4, the S&P Global India Composite PMI Output Index was indicative of a substantial pace of expansion.
Services saw the slowest upturn in one year. Similarly, factory orders rose to a greater extent and demand for services somewhat cooled. At the composite level, sales increased at the weakest rate since November 2022. India’s private sector also recorded receding inflationary pressures in November. Both input costs and output charges increased at the slowest rates since March. Inflation was more pronounced at services companies than at their manufacturing counterparts. “Despite seeing price pressures waning in November, private sector companies signalled rising inflation expectations through qualitative data for growth prospects. Optimism remained strongly upbeat, but faded to a six-month low,” it said
The PMI data comes a day before the RBI’s Monetary Policy Committee will begin its three-day meeting to decide on the interest rates.
Source:financialexpress.com