Home / Markets / Mark To Market /  PMI: Poor export demand continues to weigh on services sector

MUMBAI: The IHS Markit India purchasing managers’ index (PMI) for the services sector showed that the Services Business Activity Index improved from 12.6 in May to 33.7 in June. However, the reading still remains below the crucial 50 mark for the fourth successive month. A figure above 50 indicates expansion and below this threshold points to contraction.

According to the survey, weak demand was particularly acute on the international front. The IHS Markit data showed that the services sector received no new export order in June. “Restrictions related to travel hindered overseas orders, according to anecdotal evidence," said the survey report.

Peers in the manufacturing sector, however, did better on this front. The new exports order sub index rose from 11.8 in May to 38.9 in June.

As a result, surveyed services providers became more pessimistic towards their prospects over the coming 12 months. The future activity sub-index for the sector stood at 43.3 in June. Business confidence slid to a survey low and also pointed to strongly negative expectations towards activity levels in the year ahead. The heightened risk of a protracted recession was commonly noted by pessimistic firms, showed the survey.

On the other hand, for manufacturers, the future output index, improved from 51.6 in May to 53.1 in June.

Meanwhile, demand disruption caused by the coronavirus continues to weigh on the sector’s output, employment generation and new orders. All these sub-indices also remain in the contraction zone.

But given the rising cases of coronavirus infection, the risk of regional lockdowns continues to loom. Which means that this rebound could be temporary.

According to economists at London-based Capital Economics Ltd, the rebound in June's services and composite PMIs suggests the economy is now on the long road to normality. But the recovery will be slow and fitful.

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