India’s Services PMI rose to 57.2 in August from July’s 4-month low of 55.5, on stronger expansion in new work intakes, upturn in business activity, and the sharpest rise in employment for over 14 years. The seasonally adjusted S&P Global India Services PMI Business Activity Index came in at 57.2, highlighting a rebound in growth. S&P Global, in a report, said that amid reports of favourable demand conditions and successful advertising, there was a further increase in new business placed with services firms during August. The rate of expansion was sharp and quickened from July. “Indian services activity rose strongly midway through the second fiscal quarter, with the pace of expansion recovering some of the ground lost in July. The pick-up in growth stemmed from a rebound in new business gains as firms continued to benefit from the lifting of COVID-19 restrictions and ongoing marketing efforts,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.
S&P Global added that services companies expect output growth over the coming 12 months, with sentiment rising to its highest level in over four years. Optimism was centered on forecasts of ongoing improvements in demand and planned marketing. At the sub-sector level, there were quicker increases in new business and output in Transport, Information & Communication and Finance & Insurance. The latter outperformed all categories on both fronts. August data highlighted another increase in the operating expenses faced by services companies, with panelists often mentioning higher food, fuel and labour costs. That said, the overall rate of inflation softened to an 11-month low.
Pollyanna De Lima added that with demand showing considerable resilience, service providers maintained a degree of pricing power and lifted selling prices amid the transfer of cost increases to customers. While the rate of charge inflation was broadly similar to July, there was a considerably softer upturn in input costs. The latter rose at the weakest pace in close to a year. “There were other positives in the latest results. Business confidence strengthened substantially, reaching its highest since May 2018, while employment rose at the fastest pace in over 14 years,” Lima noted.
Increase in private sector output, sales
Aggregate output growth in India recovered from July’s slowdown as both manufacturers and service providers noted quicker rates of increase in August. The S&P Global India Composite PMI Output Index rose from 56.6 to 58.2, indicating a sharp pace of expansion. New work intakes increased at quicker rates in the manufacturing and service sectors, leading to the fastest upturn at the composite level for nine months. Indian private sector jobs expanded to the greatest extent in over 14 years midway through the second fiscal quarter. The upturn was driven by a substantial acceleration in growth across the service economy, while manufacturers registered a broad stabilisation of payroll numbers.
There was a softer increase in operating expenses facing private sector companies. The rate of inflation retreated to a 19-month low in August. On the other hand, selling prices rose at a slightly quicker rate in August, though one that was well below that seen for cost burdens.