Private sector output falls for seventh month running, although marginally
The headline HSBC Services Business Activity Index increased from December's 46.7 to 48.3 in January, signalling a moderate rate of output contraction that was the weakest in the current seven-month sequence of decrease. Panellists cited tough economic conditions, political issues and lower new order levels as the main reasons behind the fall in output.Up from 48.1 in December to 49.6 in January, the seasonally adjusted HSBC India Composite Output Index indicated a seventh consecutive monthly drop in private sector activity. The rate of contraction was marginal and the weakest in that sequence. Whereas manufacturing production growth accelerated, output at services companies fell again.
Service providers reported falling new business received for the seventh month running in January, with increased competition for new work, deteriorating confidence among clients and weaker underlying demand. Nonetheless, the rate of contraction was slight and the slowest in that sequence. Manufacturing new orders rose at the quickest pace since March 2013. Incoming new work across the Indian private sector as a whole fell, albeit fractionally.
Despite having lower new business, service providers hired additional workers in January. Where job creation was indicated, this was attributed to expectations of higher new orders in coming months. With manufacturing employment also growing, staffing levels across the private sector increased for the second successive month (although slightly).
Service providers were optimistic in January that business activity would expand over the next year. Growth is expected to be supported by planned increases in marketing, forecasts of an overall improvement in the Indian economy and stronger demand. Moreover, the degree of positive sentiment was the highest in six months.
Meanwhile, input cost inflation in the Indian private sector economy hit a three-month high, while the rate of charge inflation was little-changed from that seen in December. Manufacturing firms recorded stronger increases in both input and output prices than their service sector counterparts.
Outstanding business in the Indian service sector fell in January, while an accumulation was recorded at manufacturers. Across the private sector as a whole, backlogs were unchanged from the levels recorded one month previously.
Sector data highlighted Post & Telecommunication as the best performing services category. This was the only sector to record higher output and new business. Conversely, Financial Intermediation suffered the sharpest declines in both business activity and new orders among the remaining five monitored service sectors.
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