Services PMI moderates in September

The composite PMI, which includes both manufacturing and services, fell to 52.4 in Sept from 54.7 in August

The pace of growth in the country’s services sector slowed in September, owing to a softer increase in output and in new business, according to a survey released on Wednesday.

The widely tracked Nikkei India Services Purchasing Managers Index (PMI) stood at 52 in September, down from the 43-month high of 54.7 in August.  The 50-point mark separates expansion from contraction.

New business orders placed with Indian services entities increased in September, following a solid rise in August. Panelists said while demand growth remained sustained, competitive pressures and unfavourable weather conditions were weighing down on new work inflows.

“The ongoing upturn in new work, combined with muted employment growth, led backlogs of work across the private sector to increase at the quickest pace in nearly two and a half years. As a result, businesses might be more willing to take on additional workers as we head to the year-end,” said Pollyanna De Lima, economist at IHS Markit and author of the report.  

These factors led to business optimism among Indian service providers falling in September, with the degree of confidence remaining below its long-run average. Challenging market conditions was frequently cited by companies as a key factor weighing on sentiment. Those anticipating activity growth over the next 12 months commented on improved marketing campaigns and hopes of a better economic environment.

Prices charged by Indian service providers increased in September, as had been the case in August. Food and petrol prices continued to climb, placing pressure on operating costs. The rate of inflation accelerated slightly but remained marginal and below the long-run series average. Output charges also increased at a quicker pace that was, however, weak by historical standards, the survey showed.

Released earlier this week, the manufacturing PMI data also showed the same slack in growth of new orders. After growing in August at the fastest clip in 13 months, the PMI was 52.1 in September, slightly down from 52.6 in August.

As a result, the seasonally adjusted Nikkei India Composite PMI Output Index fell from August’s 42-month high of 54.6 to 52.4 in September. Still, the latest above-50 reading was the 15th in as many months, highlighting ongoing growth.