India services PMI falls to 13-month low in November, economy hit: HSBC

Dec 05 2012, 11:43 IST
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Shows an economy limping towards its slowest full-year growth in a decade. (Reuters) Shows an economy limping towards its slowest full-year growth in a decade. (Reuters)
SummaryShows an economy limping towards its slowest full-year growth in a decade.

India logged a services sector growth that is at its weakest pace in over a year during November due to slowing orders, a survey showed on Wednesday, suggesting an economy limping towards its slowest full-year growth in a decade was struggling to re-find momentum.

Services make up nearly 60 percent of India's economic output and any sign of deceleration darkens the outlook for Asia's third-largest economy, as the sector has been the lone bright spot for most of this year.

The HSBC services Purchasing Managers' Index (PMI), based on a survey of around 400 companies, fell to 52.1 in November from October's 53.8, to register a 13-month low.

The 50 level separates growth from contraction compared to the previous month, and while the November reading marked a second straight month-on-month drop, the index has held above 50 for a year now.

"Business activity expanded at a slower pace in November and new business also grew at a slower clip, which in both cases may partly reflect the fewer working days due to the Diwali," said Leif Eskesen, economist at HSBC.

The vast majority of India's over 1.2 billion people celebrated the festival of Diwali last month which meant many services firms remained shut for a few days.

While there is strong overseas demand for Indian services, a looming budget crisis in the United States, if not averted, could put the brakes on exports and slow new outsourced deals for Indian software companies.

Still, firms were more optimistic about the future. The business expectations sub-index jumped almost four points to 72.2 in November from 68.3 in the previous month.

"The forward-looking business expectation index improved notably, with some respondents reporting planned business expansion," Eskesen added.

Also encouragingly, a similar survey released on Monday showed the Indian manufacturing sector in November grew at its fastest pace in five months thanks to strong export orders and a surge in output.

The services survey also showed prices rose at a steady pace from last month, and with both the input and output costs rising sharply in the manufacturing survey, the pressure will remain on the headline inflation rate.

Wholesale prices rose 7.5 percent in October, and for three years the inflation rate has stayed well above the Reserve Bank of India's commonly perceived comfort zone of around 5 percent.

Citing price pressures the RBI has held the key repo rate on hold since April, even as many other central banks around the world have cut rates.

The

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