The seasonally adjusted S&P Global India Services PMI Business Activity Index stood at 55.5 in July, from from 59.2 in June, which was the highest figure in over 11 years. The latest reading indicated the slowest rate of growth in four months.
The recovery of the Indian service sector lost momentum during July as weaker sales growth and inflationary pressures restricted the latest upturn in business activity. While marketing efforts underpinned another rise in new work intakes, competitive pressures and unfavourable weather dampened demand. That said, the weaker recovery was supplemented by retreating price pressures. Input costs increased at the slowest rate since February, while output charges were hiked to a weaker extent than in June, S&P Global said in a statement.
Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said: “There were many positives in the latest results.
Business activity continued to rise strongly, with a similarly robust uplift in new business as the offering of new services and marketing efforts bore fruit.
“There was, however, a noticeable loss of momentum for the Indian service economy as demand was somewhat curtailed by competitive pressures, elevated inflation and unfavourable weather. Both output and sales increased at the weakest rates for four months.
“In line with concerns that economic growth has weakened as we enter the second fiscal quarter, service providers signalled subdued confidence towards the medium-term business outlook. Only 5% of panellists forecast output growth over the course of the coming 12 months, while 94% predict no change from present levels.
“The subtle easing in cost inflationary pressures to a five-month low was also welcomed by services firms struggling to preserve margins, and contributed to a softer rise in prices charged. Yet, survey participants again reported considerable strain from food, fuel, input, labour, retail and transportation costs.”
Meanwhile, the S&P Global India Composite PMI Output Index fell to 56.6 from 58.2 in June, highlighting the slowest increase since March. Manufacturing led the upturn with the quickest rise in production since last November, while growth of services activity eased to the weakest in four months.
Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices.
The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.
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