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PMI services hit 3-month high in March

The S&P Global Purchasing Managers’ Index (PMI) for services rose to 53.6 in March from 51.8 in February, with firms recording the fastest growth in sales and business activity so far in calendar year 2022. (Photo: Mint) Premium
The S&P Global Purchasing Managers’ Index (PMI) for services rose to 53.6 in March from 51.8 in February, with firms recording the fastest growth in sales and business activity so far in calendar year 2022. (Photo: Mint) 

  • The upturn in the services sector activity was led by new business orders, strengthening demand conditions, and higher consumer footfall due to the relaxation of pandemic restrictions

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Activity in India’s services sector recovered to a three-month high in March even as sharp inflationary pressures led by the Russia-Ukraine conflict increased costs and dampened business confidence, a private survey showed on Wednesday.

The S&P Global Purchasing Managers’ Index (PMI) for services rose to 53.6 points in March from 51.8 in February as firms recorded the fastest growth in sales and business activity so far in 2022 after Covid-19 related restrictions were lifted.

Input costs increased at the sharpest pace in 11 years at the end of fiscal year 2022, but companies mostly absorbed the additional costs and raised the final price only moderately, according to the report. However, going forward, consumers may face higher service charges as cost pressures rise, it said.

The 50-point mark separates expansion from contraction. But it should be noted that the PMI is a monthly indicator, showing improvement over the previous month, and not over the previous year.

“The war in Ukraine exacerbated lingering issues in supply chains, triggering a re-acceleration in inflation across the Indian service economy. The March results showed the sharpest upturn in input costs for 11 years, but this did not put a brake on the recovery of the sector," said Pollyanna De Lima, Economics Associate Director at S&P Global.

The upturn in the services activity was led by new business wins, strengthening demand and increased consumer footfall due to easing restrictions.

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“Buoyed by the relaxation of Covid-19 restrictions, consumers were eager to go out and spend…Sales were somewhat supported by only mild adjustments to output charges, however, with consumers likely to face soaring prices in the coming months as rising cost burdens feed through to services charges," said De Lima.

Domestic market largely contributed to the sales growth as new business from abroad fell further. The contraction in new export orders was sharp and the fastest since last September, the report showed.

Inflation dampened business confidence in March. Even as companies remained upbeat on growth prospects, the overall sentiment remained subdued.

“Inflation risks continued to curb business optimism regarding growth prospects, with sentiment among services companies remaining subdued by historical standards. This lack of confidence in the outlook also meant that employment continued to fall in March," said De Lima.

While data pointed to a further decline in service sector jobs, albeit marginally, the rate of contraction slowed down. Among the sub-sectors, finance & insurance emerged as the best-performing in March, reporting the best trends for sales and output. Real estate and business services were the weakest, posting a marked and accelerated decline in new business and activity. Consumer Services recorded the strongest increase in input costs, while transport, information & communication registered the sharpest rate of output inflation.

The Composite PMI Output Index, which accounts for both manufacturing and services activity rose to 54.3 in March from 53.5 in February. Input price inflation was more acute in services than in manufacturing.

 

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