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India’s services sector experienced a notable slowdown in August, with the pace of growth cooling to its second-weakest since March 2022, despite an uptick in new business and a 15-month high in job creation, according to the latest HSBC India Services PMI.
Illustration: Dominic Xavier/Rediff
Key Points
- India’s services activity expanded in August, with the HSBC India Services PMI Business Activity Index rising to 54.1 from 53.3 in July.
- The pace of growth in August was the second-slowest since March 2022, attributed to subdued bookings, strong competition, and reduced transport operations.
- Despite the slowdown in overall growth, job creation in the services sector reached a 15-month high.
- Price pressures picked up modestly, with input cost inflation rising slightly and prices charged increasing at the fastest rate since March.
- International demand continued to support growth, with new export orders rising solidly from clients in various global markets.
India’s services activity expanded in August, supported by stronger output and new business, even as the overall pace of growth was the second-slowest recorded since March 2022, a monthly survey said on Thursday.
The seasonally adjusted HSBC India Services PMI Business Activity Index rose from 53.3 in July to 54.1 in August, as demand conditions remained supportive and new business inflows continued to rise.
Growth Slowdown and Contributing Factors
The rate of expansion recorded in August was the second-weakest since March 2022, amid subdued bookings, strong competition and reduced transport operations.
The HSBC India Services PMI Business Activity Index is based on a single question asking how the level of business activity compares with the situation the month before.
“India’s services activity expanded faster in August.
“Growth was supported by stronger output and new business, although the overall pace was still among the weakest seen in over four years, with some firms citing subdued bookings, competition and reduced transport operations,” said Pranjul Bhandari, Chief India Economist at HSBC.
Employment and Price Pressures
Firms nevertheless continued to hire, with job creation reaching a 15-month high, while price pressures picked up only modestly.
“Employment increased at a marked rate, with job creation reaching a 15-month high.
“Price pressures picked up only modestly: input cost inflation edged up slightly, while prices charged rose at the fastest rate since March as firms passed on higher operating costs,” Bhandari said.
Companies reported higher spending on digital platforms, electricity, inputs, labour, marketing and regulatory requirements.
International Demand and Outlook
Meanwhile, international demand continued to support growth.
New export orders rose solidly and at a similar rate to July, with companies reporting gains from clients in markets including Australia, Brazil, Canada, Japan, Malaysia, Singapore, Sri Lanka and the UAE.
Confidence about the year-ahead outlook was broadly unchanged from July and stayed below its long-run average.
Service providers remained hopeful that market conditions and demand would improve, with technology adoption and new enquiries also supporting optimism.
Composite PMI Overview
The HSBC India Composite PMI Output Index stood at 54.3 in August, the second-weakest since February 2022.
Goods producers noted a slowdown in growth, whereas service providers registered a quicker upturn.
Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices.
Weights reflect the relative size of the manufacturing and service sectors according to official GDP data.
“An acceleration in growth of services activity offset a slowdown in manufacturing and left the pace of private sector growth unmoved in August.
“However, quicker expansions in aggregate employment and new order volumes were recorded,” the survey said.
The HSBC India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.
