 "Services growth loses steam in September: Nikkei PMI")
A day after top bureaucrats in the finance ministry kept their fingers crossed over gross domestic product (GDP) growth, expansion in the largest sector of the economy — services — slowed down in September compared to the previous month, widely-tracked Nikkei purchasing managers’ index (PMI) showed.
Firms did not hire additional hands. Prices remained subdued, justifying the Reserve Bank of India’s move to cut the repo rate by 50 basis points.
PMI was down to 51.3 points in September, compared to a four-month high of 51.8 in August. A reading above 50 shows expansion and one below it shows contraction.
While higher new business was reported to have led activity to increase, tough economic conditions weighed on growth, said Markit Economics, which compiles PMI data.
Incoming new work at service providers rose for the third month in succession during September, but the rate of expansion eased since August.
Where growth was noted, this was attributed to improved marketing strategies and increased demand.
As a consequence of the slowdown, Indian service providers maintained employment levels broadly unchanged in September. This was indicated by the respective index recording only fractionally below the crucial 50.0 threshold.
Input costs faced by services firms decreased in September for the first time in 10 months, with survey participants reporting lower petrol prices.
Data indicated private sector businesses passed falling input prices on to clients as tariffs were lowered on average. Although only marginal, the latest decrease in output prices was the first recorded since the financial crisis.
PMI data released last week had shown manufacturing growth also slowed down to 51.2 points in September from 52.3 in the previous months. As such, composite PMI output index fell from 52.6 in August to 51.5 in September, highlighting the weakest rate of expansion in the current period of growth.
Firms did not hire additional hands. Prices remained subdued, justifying the Reserve Bank of India’s move to cut the repo rate by 50 basis points.
While higher new business was reported to have led activity to increase, tough economic conditions weighed on growth, said Markit Economics, which compiles PMI data.
Incoming new work at service providers rose for the third month in succession during September, but the rate of expansion eased since August.
Where growth was noted, this was attributed to improved marketing strategies and increased demand.
As a consequence of the slowdown, Indian service providers maintained employment levels broadly unchanged in September. This was indicated by the respective index recording only fractionally below the crucial 50.0 threshold.
Input costs faced by services firms decreased in September for the first time in 10 months, with survey participants reporting lower petrol prices.
Data indicated private sector businesses passed falling input prices on to clients as tariffs were lowered on average. Although only marginal, the latest decrease in output prices was the first recorded since the financial crisis.
PMI data released last week had shown manufacturing growth also slowed down to 51.2 points in September from 52.3 in the previous months. As such, composite PMI output index fell from 52.6 in August to 51.5 in September, highlighting the weakest rate of expansion in the current period of growth.
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“India’s economy lost steam in September, with growth fading across both the manufacturing and service sectors. The sluggish increase in private sector output mirrored softer demand conditions across the country, while growth of global demand for Indian goods also moderated," said Pollyanna De Lima, economist at Markit.
On Monday, economic affairs secretary Shaktikanta Das said that the economy would grow more than 7.5 per cent in the current financial year, lower than earlier estimates of 8.1-8.5 per cent. The gross domestic product rose 7 per cent in the first quarter of the current financial year against 7.3 per cent in the fourth quarter of 2014-15.
The ministry would revise GDP projections once second quarter GDP data comes.
PMI for services is based on a survey of private sector firms. Their confidence about services activity in the coming 12 months was the weakest registered in the survey history.
Looking ahead, service providers expect further setbacks, as highlighted by the future output index sliding to its lowest mark in the history of the series," De Lima said.
