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Business News/ Economy / Services sector activity sees fastest expansion in over a decade in Oct
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Services sector activity sees fastest expansion in over a decade in Oct

Some firms expect sales and output to increase as the pandemic recedes and marketing efforts bear fruit, but others were concerned about the impact of inflationary pressures on the recovery

Purchasing Managers’ Index (PMI) for services rose to 58.4 in October from 55.2 in September, expanding for the third consecutive month. (File Photo: HT) Premium
Purchasing Managers’ Index (PMI) for services rose to 58.4 in October from 55.2 in September, expanding for the third consecutive month. (File Photo: HT) 

NEW DELHI: India’s services activity registered the strongest growth in ten and-a-half years in October as a steady decline in fresh coronavirus cases led to rise in new business activity, a private survey showed. However, business confidence remained subdued due to growing concerns surrounding price pressures as companies lifted their fees at the fastest pace in close to four-and-a-half years on account of sharply rising input costs.

Data released by IHS Markit showed that Purchasing Managers’ Index (PMI) for services rose to 58.4 in October from 55.2 in September, expanding for the third consecutive month. A reading above 50 indicates expansion in economic activity.

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The data analytics firm said output prices rose at a solid rate that was the strongest since July 2017 with anecdotal evidence suggesting that additional cost burdens were passed on to clients. “October data highlighted a sixteenth successive monthly increase in input costs at Indian services firms. The rate of inflation was at a six-month high and outpaced its long-run average. Monitored companies cited higher fuel, material, retail, staff and transport costs," it added.

Pollyanna De Lima, economics associate director at IHS Markit, said while a substantial rise in prices charged for the provision of services in India had no detrimental impact on demand in October, service providers were concerned that persistent inflationary pressures could deter growth in the coming year. “Business confidence remained subdued in the context of historical data. Companies' expenses rose notably from September, which survey participants mainly linked to higher fuel, material, retail, staff and transportation costs," she added.

Indian firms were able to secure a healthy intake of new work despite charging more for their services. “Services companies continued to hire additional workers in October. Although moderate, the pace of job creation quickened from September to the strongest since February 2020," the data analytics firm said.

The latest data continued to point to weak international demand for Indian services. “New export business decreased in October, a trend that has been recorded since the covid-19 outbreak. Despite being solid, the rate of contraction was the weakest since March," it added.

Some firms expect sales and output to increase as the pandemic recedes and marketing efforts bear fruit, but others were concerned about the impact of inflationary pressures on the recovery. “Although service providers were confident that business activity would increase over the course of the coming 12 months, the overall level of sentiment was little-changed from September and well below its long-run average," the firm said.

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Published: 03 Nov 2021, 11:25 AM IST
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