India’s services sector growth touched a four-month high in December, supported by new business inflows on strong demand conditions and easing inflationary pressures, a monthly survey said on Monday.
The seasonally adjusted HSBC India Services Business Activity Index, rose from 58.4 in November to 59.3 in December, highlighting the strongest rate of expansion in four months.
In the Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.
According to the survey, demand buoyancy continued to drive new business inflows higher, which in turn supported output growth and prompted firms to recruit additional workers.
“India’s services companies expressed strong optimism in December as business activity growth surged to a four-month high.
“Forward-looking indicators such as new business and future activity suggested that the strong performance will likely continue in the near future,” Ines Lam, Economist at HSBC, said.
On the price front, there was a softer increase in cost burdens, though panellists continued to report greater outlays on food, labour and materials. Selling price inflation also eased in December.
“The easing of input price inflation in the month also supported business sentiment.
“Strength in the services PMI stands in contrast with the growing signs of a slowdown in the manufacturing industry,” Lam noted.
India’s manufacturing sector growth fell to a 12-month low in December, as new business orders and production expanded at softer rates.
Service providers remained confident that output would increase over the course of the coming 12 months.
The overall level of positive sentiment fell from November’s six-month high but remained above its long-run average.
The combination of new business growth, upbeat forecasts and rising capacity pressures supported another round of job creation across the service economy.
“The rate of employment growth softened from November, but was sharp and among the strongest seen since data collection began in December 2005,” the survey said.
Meanwhile, private sector companies in India posted a faster increase in output at the end of the calendar year. At 59.2 in December, up from 58.6 in November, the HSBC India Composite Output Index signalled the strongest rise for four months.
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.
The fastest increase in new business at services firms more than offset a fractional slowdown at goods producers.
As a result, aggregate sales expanded at a stronger rate, 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.
