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Services PMI slips from November’s 4-month high

Services PMI slips from November’s 4-month high

Bangalore: Growth in India’s service sector eased in December from a four-month high the previous month, reflecting a slightly slower expansion in new business, a survey showed on Wednesday.

The HSBC Markit Business Activity Index, based on a survey of around 400 firms, fell to 57.7 in December from 60.1 in November -- its strongest reading since July 2010.

The December reading marked the 20th consecutive month that the key index of services in Asia’s third-largest economy has been above the 50 mark that divides growth from contraction.

While the latest figure pointed to a sustained expansion in activity in the Indian service sector, it was weaker than the average for the year, the survey showed.

“The upturn in the service sector continued in December and companies remained optimistic about the outlook, although the respective index readings eased from the previous month," said Leif Eskesen, chief economist for India and Asean at HSBC.

“The expansion in activity was primarily driven by new business, which benefitted employment but also led to a small increase in outstanding business," Eskesen added.

Growth in new business remained strong although the sub-index fell marginally to 56.8 in December from the previous reading of 57.7.

The December data also signalled a moderate rise in employment in the Indian service sector, with job growth now recorded in each month since April 2009.

Both input and output prices rose, with the growth in input costs accelerating to its highest levels since July.

“As we saw for the manufacturing sector, strong growth momentum pushed up input costs, mainly from higher wages and fuel costs, at an accelerated pace and service sector companies saw increasing scope to pass on these higher costs to end-consumers," Eskesen said.

The pace of growth in India’s manufacturing sector also eased in December compared with the previous month, weighed down by a weakening growth in factory output and new orders, a survey showed on Monday.

The Reserve Bank of India (RBI) left key interest rates on hold last month after six increases since March but warned inflation was still well above its comfort level, adding to the possibility that it will resume monetary tightening in January.

“The tightening capacity constraints and rising inflation pressures call on RBI to deliver on its hawkish statement and resume tightening in early 2011," Eskesen said.

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