Nikkei India Composite PMI Output Index fell from August's 42-month high of 54.6 to 52.4 in September
The health of the Indian private sector economy improved in September, but to a lesser extent than in August. Output and new business increased at softer rates in both the manufacturing and service sectors. Meanwhile, prices charged were raised in line with higher cost burdens.Reflecting softer expansions in activity at both service providers and manufacturers, the seasonally adjusted Nikkei India Composite PMI Output Index fell from August's 42-month high of 54.6 to 52.4 in September. Nonetheless, the latest above-50.0 reading was the fifteenth in as many months, highlighting ongoing growth in the country.
The headline seasonally adjusted Nikkei India Services Business Activity Index registered 52.0 in September. Down from August's 43-month high of 54.7, the latest reading pointed to a slower rate of expansion that was moderate overall.
The level of new business placed with Indian services firms increased moderately in September, following a solid rise in August. Panellists commented on sustained demand growth, but mentioned competitive pressures and unfavourable weather conditions as factors weighing on new work inflows. The upturn in order books at manufacturers also lost some momentum.
Outstanding business at Indian service providers rose for the fourth month running in September and at the quickest rate since July 2014. Goods producers saw a softer increase in work-in-hand, but one that remained solid.
Contributing to higher backlogs was broadly stagnant staffing levels at services firms and manufacturers, a trend that has been evident throughout 2016 so far. The respective indices recorded only fractionally above the crucial 50.0 threshold as the vast majority of panellists in each sector signalled unchanged headcounts.
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Prices charged by Indian service providers increased in September, as was the case in August. The rate of inflation accelerated slightly, but remained marginal and below the long-run series average. Survey respondents attributed higher output prices to rising cost burdens. Factory gate charges also increased at a quicker pace that was, nonetheless, weak by historical standards.
Input prices facing service providers rose in September, having decreased in each of the previous two months. That said, the rate of cost inflation was moderate and weaker than the survey's historical average. Higher food and petrol prices were identified by panellists as factors contributing to the overall increase in average input costs. Purchase price inflation at manufacturers picked up, though remained below its long-run average.
Business optimism among Indian service providers fell in September, with the degree of confidence remaining below its long-run average. Challenging market conditions was frequently reported by panellists as a key factor weighing on sentiment. Those respondents anticipating activity growth over the next 12 months commented on improved marketing campaigns and hopes of a better economic environment.
Commenting on the Indian Services PMI survey data, Pollyanna De Lima, economist at IHS Markit, and author of the report, said: "Service sector performance in India continued to improve relatively modestly in September, a trend that has been evident throughout the year-to-date. With manufacturing also on a softer footing, growth of private sector output and new orders eased in the latest month.
"Over Q2 FY2016/17, however, the PMI Composite Output Index posted its highest reading since the Jan-Mar 2015 quarter, thereby suggesting a pick-up in GDP growth. This would be welcome by policy makers after the below-expectations figure of +7.1% y/y recorded in Q1.
"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 of this, businesses may be more willing to take on additional workers as we head to the year end.
"Food and petrol prices continued to climb in September, which placed pressure on operating costs. In response, private sector companies raised their own prices for the second straight month, although inflation remained relatively soft."
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