Business activity growth returns on back of surging new orders: PMI

Indian service providers signalled that their subdued business performance at the end of the first quarter of fiscal year 2019-20 dissipated in July with activity returning to growth and new work intakes rising at the fastest rate in just under threeyears, a private survey showed on Monday.

Moreover, job creation picked up to the strongest since early-2011 in response to strengthening demand conditions and upbeat predictions for the economic outlook. Another positive development in July included the continuation of subdued input cost inflation. This led to only a marginal increase in output prices over the month.

Rising from 49.6 in June to 53.8 in July, the IHS Markit India Services Business Activity Index pointed to the quickest increase in output in one year. Four of the five monitored subsectors posted expansion, the sole exception being real estate and business services.

 

Survey respondents overwhelmingly linked the upturn in business activity to a promising government budget, strengthening demand and new client wins. Not only did new work intakes rise for the 17th straight month, but also to the greatest extent since October 2016.

Moreover, the pace of growth was marked and the fastest since this measure was introduced to the survey in September 2014.

"India's service economy showed renewed vigour in July as businesses and households welcome the recent government budget announcement," said Pollyanna de Lima, Principal Economist at IHS Markit. "PMI data indicated that the strongest upturn in new work for nearly three years led to a rebound in business activity."

de Lima said service providers reported a widespread improvement in demand, from the public and private sectors as well as domestic and international markets. Growth of export orders hit a series peak.

"The ground gained in services during July meant that the gap in the performance of the two monitored sectors was the narrowest in one year. India's labour market continues to go from strength-to-strength, with the pace of service sector job creation the highest in over eight years," she said.

Ongoing expansions in the employment base should support household spending and consumer confidence in the near-term, de Lima added.

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