Growth of private sector activity continues at solid pace in January Say HSBC PMI
Rising from 52.9 to 53.3, the headline HSBC India Composite PMI Output Index signalled further growth of private sector output in January, extending the current sequence of expansion to nine months. The latest increase was solid overall, albeit weaker than the historical average. Manufacturing output continued to rise faster than service sector activity at the start of 2015.Adjusted for seasonal influences, the HSBC India Services PMI Business Activity Index - a single question tracking changes in activity at Indian services companies on a month-by-month basis - posted 52.4 in January, up from 51.1 in December and signalling a solid expansion in business activity. According to survey responses, the latest increase in activity reflected further growth of new business during the month. Among the monitored subsectors, activity rose quickest in 'Other Services', while the sharpest reduction occurred in Financial Intermediation.
Indian services companies reported sustained growth of new business in January, extending the current sequence of expansion to nine months. Anecdotal evidence linked higher new work inflows to solid demand conditions and new marketing initiatives. Meanwhile, new order growth at manufacturers eased during the month, leading to a slower, but still solid, rise across the private sector as a whole
Despite solid growth of activity and new business, payroll numbers in the Indian service sector rose only fractionally in January. Moreover, the rate of job creation was slower than the historical average. Staffing also increased marginally at goods producers and across the private sector overall.
Volumes of work-in-hand at Indian service providers increased for the fourth month running in January. The rate of backlog accumulation was only modest overall, albeit quicker than seen at the end of 2014. Outstanding business in the manufacturing sector also rose at a faster pace, as the rate of private sector backlog growth picked up to a three-month high.
Input costs faced by Indian services firms rose for the second straight month in January, having fallen for the first time in more than five-and-a-half years in November. The rate of cost inflation picked up to the sharpest in six months, although remained muted in the context of historical data. Similarly, private sector input costs increased at the quickest pace since August, contrasting with weaker cost pressures at goods producers.
Prices charged in the Indian service economy also increased for the second consecutive month in January. Inflationary pressures on selling prices intensified to the most pronounced since July 2014, but were only moderate overall. Average tariffs followed a similar trend across the private sector as a whole, while the rate of charge inflation at manufacturers remained marginal.
Finally, Indian service providers were the most upbeat regarding the 12-month outlook for activity since mid- 2014 in January. Panel members attributed optimism to anticipated improvements in demand and new commercial initiatives.
Commenting on the India Services PMIsurvey, Pranjul Bhandari, Chief India Economist at HSBC said, The January Services PMI was marked by faster expansions in activity and new orders. The weakest sectoral performance in this otherwise encouraging data was from financial services. Business sentiment led by anticipated improvements in demand and new commercial initiatives, rose to a seven-month high. On the inflation front, both input and output prices rose further, though at a modest pace when compared to historical trends. We expect RBI to cut rates by a total of 75bp in 2015, but no further as latent inflation pressures could pick up when growth sees a meaningful lift."
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