Indian services activity accelerates in Oct as demand surges

Indian services activity accelerated rapidly in October as broadly steady prices helped drive a surge in domestic and foreign demand, a survey showed on Thursday.

The Nikkei/Markit Services Purchasing Managers' Index jumped to 54.5 in October from 52.0 in September. It has only been higher once - in August - since January 2013 and marked its 16th month above the 50 level that separates growth from contraction.

A sub index measuring new business climbed to 54.3 in October from 52.1, its second highest in over two years, although optimism cooled to a four-month low, suggesting a slowdown is possible after the annual festive season between Oct-Dec.

"The service sector joined its manufacturing counterpart in offering a more upbeat level of performance this month (Oct), providing reassurance in the sustainability of the upturn of India's economy," said Pollyanna De Lima, economist at survey compiler IHS Markit.

A sister survey on Tuesday showed Indian factory activity expanded at its fastest pace in almost two years, boosted by a surge in output and new orders.

Taken together they pushed the composite PMI, which includes both manufacturing and services, to 55.4 in October from 52.4, its highest since January 2013.

The upturn came as services companies held prices broadly steady and if that trend continues it could lead to lower inflation, giving the Reserve Bank of India room to cut interest rates further after a surprise easing last month.

Retail inflation cooled to a 13-month low of 4.31 percent in September on softer food prices.

A weak spot in the latest report was employment levels, which held steady in October after nudging up in September.

"One underlying concern is the sustained stagnant trend in workforces, with both manufacturers and service providers showing some reluctance to hire," De Lima added.