Demand propels growth of PMI Services to 4-mth high

New Delhi : India’s services sector growth rose to a 4-month high in December as robust demand boosted business activity with strong job creation taking place during the month, according to a survey released on Monday. The HSBC India Services Purchasing Managers’ Index, compiled by S&P Global, increased to 59.3 in December from 58.4 in November, which is the highest level since August.

“India’s services companies expressed strong optimism in December as business activity growth surged to a four-month high. Forward-looking indicators such as new business and future activity suggested that the strong performance will likely continue in the near future,” Ines Lam, Economist at HSBC, said. On the price front, there was a softer increase in cost burdens, though panellists continued to report greater outlays on food, labour and materials. Selling price inflation also eased in December.

“The easing of input price inflation in the month also supported business sentiment. Strength in the services PMI stands in contrast with the growing signs of a slowdown in the manufacturing industry,” Lam noted.

Strong underlying demand was identified by companies as the primary factor behind output growth in the services sector. In some instances, survey members indicated that recent efforts to expand capacities allowed them to accept more work.

The overall level of positive sentiment remained above its long-run average, with service providers exuding confidence that output would increase over the course of the coming 12 months. Expanded capacities, new customer enquiries and budget allocation towards marketing were some of the positive factors propelling growth.

Although services companies continued to see their business expenses rising in December, the rate of inflation softened from November’s 15-month high. Reflecting a further increase in input costs, service providers raised their own fees again in December. The combination of new business growth, upbeat forecasts and rising capacity pressures supported another round of job creation across the services sector.