 "Service Sector PMI")
Growth in India’s services sector slowed in May to a five- month low as domestic demand weakened, according to a survey, which also showed exports growing and job creation improving.
The headline Purchasing Managers’ Index (PMI) figure released by HSBC on Wednesday saw a decline to 60.2 in May from 60.8 in April. “May data showed that robust increases in new business intakes continued to underpin output growth across India's service economy. Rates of expansion eased to the slowest in the calendar year-to-date, however, amid fierce competition, price pressures and a severe heat wave,” it said.
The survey noted that new orders from international markets expanded at the steepest pace since the inception of the monthly survey nearly a decade ago, with a rebound in business confidence to its strongest in eight months.
Maitreyi Das, global economist at HSBC, said India’s service activity rose at a softer pace in May, with domestic new orders easing slightly but remaining robust to imply strong demand and successful advertising.
“New export orders surged at a record pace, with broad-based demand from across the globe,” said Das.
The survey noted that new export orders improved substantially in May with the fastest growth since the survey’s inception in September 2014. The survey participants noted strong growth in demand from Asia, Africa, Europe, West Asia and the United States.
The survey noted that cost pressures intensified in May as outlays on materials and labour rose with higher prices for meat, packaging and vegetables.
“On the price front, cost pressures ticked up in May led by higher raw material and labour costs. Firms were only able to transfer a part of the price rise to customers. Good news is the level of optimism about the year-ahead outlook rose at the fastest pace in eight months, leading service firms to increase their staffing levels,” said.
On the employment front, the survey noted that while some companies suggested that additional labour costs stemmed from overtime payments and upward salary revisions due to demand strength and productivity gains, several firms indicated having taken on extra staff.
“Not only did employment rise markedly, but also to the greatest extent since August 2022. Companies reported having hired junior and mid-level workers in May. One factor that underpinned recruitment was a pick-up in capacity pressures among service providers.”
The May figure marks 34 months of the index remaining above the 50-mark since July 2021. A figure above 50 in the index denotes expansion and below that signifies contraction in the sector.
