India’s service sector saw slight recovery in August as demand conditions remained supportive and new business inflows rose. While output and sales growth strengthened from July, the pace of expansion in activity was slowest in over four years, S&P Global said on Thursday.
The HSBC India services Purchasing Managers’ Index rose from 53.3 in July to 54.1 in August but was fractionally below its long-run average of 54.5. The 54.1 PMI print in August was the second-weakest since March 2022. A PMI reading of more than 50 denotes expansion in activity from the previous month, while a print below 50 indicates contraction.
“Subdued bookings, strong competition and reduced transport operations limited growth, panel member reports showed. New business also increased more quickly, helped by stronger customer demand and marketing initiatives,” S&P Global said.
However, the pace of expansion was still the second slowest in nearly four-and-a-half years, with some services firms cited challenging market conditions and weaker client interest.
New export orders in August rose at a similar rate to July, with services companies reporting gains from Australia, Brazil, Canada, Japan, Malaysia, Singapore, Sri Lanka and the United Arab Emirates.
Service sector firms continued to hire, with job creation at a 15-month high in August. “Around 11% of survey members reported higher staffing levels, which they linked to efforts to support customer service, sales and digital operations,” S&P Global said.
Price pressures picked up only modestly in August across the service economy. Companies spent higher on digital platforms, electricity, inputs, labour, marketing, and regulatory requirements, S&P Global said.
Services firms passed on higher costs to clients in August with charge inflation rising at the fastest rate since March.
A recovery in services activity growth in August offset a slowdown in manufacturing, which left the pace of private sector growth unmoved in August. The HSBC India composite PMI remained at 54.3 in August. “The latest print was consistent with a solid pace of growth that was the joint-slowest in four-and a-half years and below the historical trend,” S&P Global said.