Services sector sustains growth streak into May
S&P Global’s India services purchasing managers’ index (PMI) for May slowed to 61.2 from 62 in April
PremiumNEW DELHI : India’s services output in May grew at the second-fastest pace since July 2010, aided by strong demand, although it moderated slightly from April, a private survey of businesses showed.
S&P Global’s India services purchasing managers’ index (PMI) for May slowed to 61.2 from 62 in April.
Still, the reading above the 50-mark, which separates growth from contraction, extends the latest expansion streak to 22 straight months, the longest in almost 12 years.
The latest reading indicated that services sector activity remained robust despite intensifying inflation, with both input costs and output prices rising. Businesses surveyed, however, reported some hiring to meet new demand.
“The PMI data for May stands as a compelling testament to prevailing demand resilience, impressive output growth, and job creation within India’s dynamic service sector," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
“Inflationary pressures continued to pose a challenge for service providers, with panellists noting rising costs for food, inputs, labour, and transportation. Faced with the delicate task of balancing these increases and maintaining affordable prices for consumers, firms opted to lift selling prices again in May," Lima added.
Additionally, the companies surveyed expanded their workforces to accommodate higher intakes of new work. Services companies maintained an optimistic view that business activity would increase over the coming 12 months.
“Advertising, demand strength, and favourable market conditions were among the reasons cited for optimistic forecasts," the survey said.
Last month, India reported a better-than-expected 7.2% growth for the year ended 31 March 2023, partly on account of robust expansion in services, along with output growth in other sectors.
Meanwhile, the S&P Global India Composite PMI Output Index—which measures combined services and manufacturing output—stayed at April’s almost 13-year high of 61.6 as the manufacturing sector expanded the fastest since October 2020.
“India’s private sector built on the strong momentum recorded in April by posting a rate of expansion in business activity that was the joint-best in just under 13 years," the survey said.
On the price front, Indian service providers reported higher food, input, transportation, and wage costs in the month. Amid reports of rising cost burden, firms charged more for their services in May.
“While ongoing increases in output charges could erode purchasing power, affect the affordability of services, and potentially dampen economic growth, companies could be seeking operational efficiencies and exploring alternative sourcing options to navigate through these challenges," Lima said.
Earlier, the manufacturing PMI for May was recorded at 58.7, the highest in 31 months. The growth was attributed to an expansion in input stocks and a rise in new orders and output. Furthermore, India’s headline retail inflation rate slowed to an 18-month low of 4.7% in April due to a favourable base effect.
The release of inflation data for the month of May data on 12 June is expected to bring it closer to the Reserve Bank of India’s medium-term target of 4%. However, before that, the RBI’s monetary policy committee is expected to announce its latest interest rate decision on 8 June.
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