HSBC sevices PMI falls for second straight month in April

Rise in new orders shows improved demand

Services, the economy’s dominating sector, saw a  moderation in growth for a consecutive  month in April, as competition increased for new work, showed HSBC Purchasing Managers’ Index (PMI).

This led to some companies shedding jobs.

One of the segments, hotels and restaurants, showed a contraction in April.  

PMI was down to 52.4 points in April, from 53 in March. A reading above 50 indicates expansion, while below it shows contraction.

With manufacturing PMI also declining from March to April, HSBC India Composite PMI Output Index fell from 53.2 points in March to a six-month low of 52.5 in April, the first month of 2015-16.

 

Pollyanna De Lima, an economist at Markit Economics, which compiles PMI data, said, “The slowdown in the Indian service sector continued in April, with weaker activity growth reflecting softer demand conditions.”

However, Markit Economics said new orders rose in April, reflecting stronger demand conditions and improved marketing strategies. “That said, the growth rate eased to a modest pace, with panelists reporting increased competition for new work,” it said.

April data highlighted falling payroll numbers in the services sector.  However, the rate of job cuts was only fractional. Employment levels at the private sector have remained largely unchanged for more than a year.

Pollyanna said job-shedding returned as companies maintained a cost-cautious approach.

Unfinished business levels at services firms increased during April. Despite being moderate, the rate of backlog accumulation was the most pronounced since last October.

Postponed payments from clients were the main reason provided by survey participants for the latest rise in outstanding work. Across the private sector, overall volumes of incomplete business rose, albeit slightly.

In line with rising raw material costs, average input prices in the Indian service economy increased further in April.

Nonetheless, the rate of inflation was moderate overall as less than five per cent of panelists reported rises.

Inflation to consumers in the service economy softened in April and was historically muted, while goods producers reduced their tariffs in an attempt to secure new business. Average selling prices across the private sector as a whole increased at a negligible rate that was the weakest since October 2010 and below its long-run average.
 

Note: Reading above 50 points is expansion and the one below 50 is contraction