Services sector activity hits 1-year low in November on slow demand, output | Mint
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Business News/ Economy / Services sector activity hits 1-year low in November on slow demand, output
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Services sector activity hits 1-year low in November on slow demand, output

Although PMI fell further last month, the overall rate of growth has been sharp, with robust demand for services fueling new business intakes and output

India's service sector has lost further growth momentum midway through the third fiscal quarter (Photograph by Harikrishna Katragadda/ MINT)Premium
India's service sector has lost further growth momentum midway through the third fiscal quarter (Photograph by Harikrishna Katragadda/ MINT)

India’s service sector activity in November slowed to the lowest levels over the previous 12 months, according to a private survey released on Tuesday, owing to slowing growth for both new orders and output across key services.

The S&P Global India Services Purchasing Managers’ Index (PMI) fell to 56.9 in November from 58.4 in October.

The figure stood at 61 in September, 60.1 in August, 62.3 in July, 58.5 in June, 61.2 in May, 62 in April and 57.8 in March. In November 2022, PMI was at 56.4. A reading above 50 shows an expansion while that below 50 shows a contraction in services activities.

“Granular data showed widespread slowdowns in rates of growth for both new orders and output across the four broad areas of the service economy. Finance and insurance topped the rankings, while real estate and business services came last," S&P Global said in a statement.

International demand for Indian services improved but as for total new orders, growth momentum dropped. The latest increase in new export orders was moderate, and the slowest since June.

S&P noted that although the overall rate of growth softened to the weakest since November 2022, it was sharp and above the series trend.

“Despite falling from 58.4 in October to a one-year low of 56.9 in November, the seasonally adjusted S&P Global India Services Business Activity Index pointed to a sharp increase in output across the sector. The rate of expansion was also considerably stronger than its long-run average. Survey participants that signalled growth mentioned favourable demand trends and new business gains," S&P said.

The November services PMI data also signalled the weakest rise in private sector activity across India for a year. 

However, despite falling from 58.4 in October to 57.4, the S&P Global India Composite PMI Output Index was indicative of a substantial pace of expansion. 

Manufacturers outperformed service providers with a quicker rate of growth, the survey showed.

“India’s service sector has lost further growth momentum midway through the third fiscal quarter, but we continue to see robust demand for services fueling new business intakes and output," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

“The current rates of expansion look very healthy when considering their respective long-run averages, and the outlook for business activity remains bright in spite of optimism fading due to rising inflation expectations. "

She added that there was some relief for service providers in India on the cost front, with the rate of input price inflation receding to the weakest in eight months. Fewer companies hiked their own fees as a result, an aspect that might provide a further boost to demand as 2023 draws to a close, Pollyanna De Lima said.

“Understandably, given the lack of pressure on operating capacities signalled by stable backlog levels, services firms became more cautious when it comes to hiring. Net employment still rose in November, but the rate of job creation was marginal and the slowest in seven months," she added.

According to the S&P Global survey, in November services firms endured a further increase in their operating expenses, with labour, food, material, and transportation costs increasing. 

The survey pointed to broadly stable levels of outstanding business among services companies, although recruitment was curbed to some extent. Net employment rose during November, but the pace of expansion was marginal and the weakest since April.

The slowdown in services sector growth rate comes at a time when India is expected to achieve 6.5% growth rate in the current financial year. Recently, chief economic adviser Anantha Nageswaran had said that with the economy growing at 7.6% in real terms in the September quarter, India was set to achieve 6.5% growth comfortably in FY24.

In the July to September period of this financial year, services such as electricity, water supply, and other utility services, and construction had expanded in double digits annually, according to second-quarter GDP figures for FY24 released last month.

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This story has been published from a wire agency feed without modifications to the text.

ABOUT THE AUTHOR
Rituraj Baruah
Rituraj Baruah is a senior correspondent at Mint, reporting on housing, urban affairs, small businesses and energy. He has reported on diverse sectors over the last six years including, commodities and stocks market, insolvency and real estate. He has previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.
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Published: 05 Dec 2023, 12:47 PM IST
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