India's services sector sees stronger expansion in business activity

Indian service providers signaled that the strong start to the second fiscal quarter continued into August, with business activity expanding to the greatest extent since March as growth of incoming new business ticked higher. Moreover, payroll numbers rose solidly as companies remained upbeat regarding the economic outlook.

Another positive development included a slowdown in output charge inflation, which was helped by cost pressures retreating to their lowest in four years.

At 60.9 in August, the seasonally adjusted HSBC India Services Business Activity Index was inside expansion territory for the thirty-seventh straight month. Moreover, rising from 60.3 in July, the headline figure indicated the strongest rate of expansion since March and one that was well above its long-run average.

 

According to panel members, growth was underpinned by productivity gains and positive demand trends. The current run of new order growth was also stretched to 37 months in August. The rate of increase quickened marginally from July and was the strongest since April, as more than one-quarter of panelists reported an improvement and only 5% indicated a deterioration.

August data showed another substantial increase in Indian private sector output. At 60.7, the HSBC India Composite Output Index matched July's reading and therefore remained comfortably above its long-run average of 54.6.

Service providers signalled the strongest increase in business activity since March, while goods producers posted the weakest rise in production for seven months.

A similar trend was seen for new orders, with the service sector posting a quicker increase as manufacturing saw a slowdown. At the composite level, sales rose substantially during August, though at the weakest pace since May.

Trends for input prices were consistent at manufacturing companies and their services counterparts, as both saw cost pressures receded in August. The aggregate rate of inflation retreated to a six-month low.

August survey data showed that prices charged for Indian goods and services rose to a lesser extent than in July. Manufacturers continued to note the quicker increase.

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