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Business News/ Economy / Services PMI eases amid inflationary trend in September
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Services PMI eases amid inflationary trend in September

Services sector activity eased sequentially in September as rising inflationary pressure worried producers regarding sustainability of high growth in coming months

While Indian companies continued to benefit from a recovery in demand as the pandemic receded further and restrictions were lifted, growth looks set to be constrained by rising inflation expectations. BloombergPremium
While Indian companies continued to benefit from a recovery in demand as the pandemic receded further and restrictions were lifted, growth looks set to be constrained by rising inflation expectations. Bloomberg

Services sector activity eased in September as rising inflationary pressure worried producers regarding the sustainability of high growth in the coming months even though loosening of pandemic curbs supported an improvement in market conditions and overall demand, a survey by a private firm showed.

Data released by IHS Markit on Tuesday showed purchasing managers’ index (PMI) for services stood at 55.2 in September, falling from August’s 18-month high of 56.7. A reading above 50 indicates expansion in economic activity. “With the pandemic receding, there was a boost to consumer footfall. This, coupled with marketing efforts, reportedly supported another increase in new business inflows. Despite easing from August, the rate of expansion was marked and the second-fastest since February 2020," the data analytics firm said.

Pollyanna De Lima, economics associate director at IHS Markit, said while Indian companies continued to benefit from a recovery in demand as the pandemic receded and restrictions were lifted, growth looks set to be constrained by rising inflation expectations.

“Signs from forward-looking indicators were mixed. Employment returned to growth territory, posting the first rise since the onset of the pandemic, suggesting that the rebound in demand is expected to be sustained and that further increases in business activity are in the pipeline. At the same time, there was another decline in outstanding business. This implies that companies still have spare capacity to accommodate for rising sales and hint that the recovery in employment is by no means guaranteed to continue," she added.

Brent, the international benchmark for crude oil, hit a new three-year high at $81.48 on Monday after oil-producing countries stayed with their gradual approach to restoring output slashed during the pandemic, agreeing to add only 400,000 barrels a day in November. The high fuel price may escalate cost pressures even as producers remain hesitant to pass on the rising prices to customers, fearing loss of early business recovery.

Yuvika Singhal, an economist at QuantEco Research, said from a manufacturing sector perspective, she will remain watchful of the brewing concerns from the global energy crisis and its impact on coal shortages, possible albeit minor spillovers from China’s credit market and the deceleration in domestic auto production amid semiconductor shortages.

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Published: 05 Oct 2021, 11:55 AM IST
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