Indian services companies saw demand growth lose strength during November, leading to the slowest rise in incoming new work since July

Indian economic activity at near-stagnation in November

Posting a five-month low of 50.2 in November (October: 52.6), the seasonally adjusted Nikkei India Composite PMI Output Index was indicative of little-change in the level of private sector activity in India. Growth of manufacturing production softened to the slowest in the current 25-month sequence of expansion, while services activity broadly stagnated.

Down from October's eight-month high of 53.2 to 50.1 in November, the seasonally adjusted Nikkei Services Business Activity Index pointed to broadly unchanged levels of services activity across the country. Sub-sector data indicated that output growth in the Financial Intermediation, Post & Telecommunication, Renting & Business Activities and 'Other Services' categories was offset by declines at Transport & Storage and Hotels & Restaurants firms. In fact, the latter recorded a sharper rate of reduction.

 

Indian services companies saw demand growth lose strength during November, leading to the slowest rise in incoming new work since July. Survey members blamed fierce competition and frail economic conditions for the slowdown in growth of new work. Order book volumes in the manufacturing economy increased for the twentyfifth straight month, although at the weakest pace in this sequence.

Amid evidence of outstanding payments from clients, unfinished business in India's private sector rose during November. That said, the rate of backlog accumulation was only modest. Work-inhand increased at both manufacturers and service providers.

Meanwhile, growth of service sector employment was only slight and below the ten-year survey average, while goods producers reported broadly unchanged staffing levels.

Input costs faced by services companies increased for the second straight month in November, with panellists reporting higher prices paid for food and petrol. The rate of inflation was only slight, despite accelerating to the fastest since July. Manufacturers recorded the quickest rise in cost burdens since May, but one that was modest and below the series average.

Regardless of the rise in cost burdens, services companies kept selling prices on hold in November. Around 97% of survey members indicated no change in their tariffs, citing limited pricing power amid weak demand conditions. Conversely, factory gate charges were raised further. The rate of inflation was, however, only marginal.

Services companies in India displayed a lack of optimism with regards to the 12-month outlook for activity, as sentiment dropped to the lowest in the ten-year survey history. Difficult economic conditions and weak demand reportedly hit confidence.

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