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The services sector, the Indian economy’s largest segment, expanded to a three-month high in May, the HSBC Purchasing Managers’ Index (PMI) showed today. Services PMI rose to 53.6 points in May from 50.7 points in April.
A reading above 50 shows expansion, while one below 50 shows contraction.
Data released on Monday showed manufacturing PMI declined to 50.1 points in May from 51 points in April. Though manufacturing output declined, the sector grew, as it included orders and outlook. The composite PMI (considering both manufacturing and services) rose to 52 points in May from 50.5 in April.
Markit Economics, which compiled the PMI data, said in May, private companies recorded a higher level of new work. However, the rate of expansion was moderate compared to April.
Service providers recorded good demand in May; many new products were also launched. However, manufacturers reported weak gains in new work, tough market conditions and increased competition. Markit Economics blamed power and water shortages for delays in certain sectors. “Companies operating in the Indian goods-producing sector signalled higher backlogs of work in May, amid reports of power and water shortages,” it said.
A slight rise in overall employment growth was seen in the manufacturing and services sectors.
For private companies, input costs rose in May. However, overall cost inflation was the lowest since November 2009. “Goods producers reported higher prices for oil, chemicals and machinery spare parts, but there was talk metals and plastic costs had fallen,” Markit Economics said.
“Services firms expect better economic conditions, combined with increased marketing and the introduction of new services, would lead to higher customer numbers,” the firm said.
Leif Eskesen, HSBC chief economist for India and the Association of Southeast Asian Nations, said, “Services sector activity picked up pace in May, led by firmer order flows. Moreover, companies were more optimistic about the domestic and global economic outlook.”
“With growth still moderate and inflation softening, the probability of another RBI (Reserve Bank of India) rate cut has increased,” he added.
According to data released by the government a few days ago, growth in the services sector stood at 6.3 per cent in the quarter ended March, against 6.2 per cent in the previous quarter.
In the quarter ended March, India’s gross domestic product grew just 4.8 per cent, a tad higher than 4.7 per cent in the previous quarter, belying hopes of an economic recovery.
PMI is based on month-on-month data. About 350 private firms are surveyed for the services data, while 500 are surveyed for manufacturing data. India’s official data, however, is actual and annual.
