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India’s service sector sees soft expansion in December; service PMI falls to 3-month low

According to IHS Markit the seasonally adjusted India Services Business Activity Index fell to a low of 55.5 in December compared to 58.1 in the preceding month.

India’s service sector sees soft expansion in December; service PMI falls to 3-month low
The seasonally adjusted India Services Business Activity Index fell to a low of 55.5 in December compared to 58.1 in the preceding month. (File Photo: Reuters)

Service sector in India saw softened expansion in the month of December with the service PMI falling to a three-month low, continuing the trend of a bumpy year, according to a survey conducted by IHS Markit. The seasonally adjusted India Services Business Activity Index fell to a low of 55.5 in December compared to 58.1 in the preceding month hurt by price pressures and the possibility of new waves of COVID-19, IHS Markit said.

“2021 was another bumpy year for service providers and growth took a modest step back in December. Still, the latest readings pointed to robust increases in sales and business activity compared to the survey trend,” Pollyanna De Lima, Economics Associate Director at IHS Markit said in the note. Even though business confidence strengthened during the month of December, the overall sentiment remained subdued in the context of historical data, the report noted.

According to the latest IHS Markit data, the expansion in new orders for service providers was largely centered around the domestic market as international demand fell due to COVID-19 restrictions, particularly around travelling.

India’s service sector also saw a renewed fall in employment numbers during December, though the rate of contraction was slight, as the majority of surveyed companies left payroll numbers unchanged from November. “Uncertainty surrounding the outlook, and a general lack of pressure on capacity, led to a renewed fall in employment during December. That said, the decline was marginal and a recovery is expected this year should demand for services remain favourable,” IHS Markit said.

The Composite PMI Output Index, which is a measure for both services and the manufacturing sector, slipped to 56.4 in December from 59.2 in November, even when it remained above its long-run average of 53.9. Manufacturers saw a stronger increase in sales than service providers while the cost push inflation was more pronounced in the service sector than in the manufacturing industry, the survey noted.

The report, however, noted that business confidence improved among goods producers and service providers at the end of 2021 and some companies expect further improvements in demand. However the pressure of high prices and COVID-19 cases spike remains and some other firms expect recovery to dampen.

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First published on: 05-01-2022 at 13:24 IST