Service sector

India’s services sector PMI rises to 51.8, composite PMI to 53.5 in February

India’s service sector output fell from 51.5 in January to 51.8 in February, indicating a moderate rate of expansion, according to a report by IHS Markit. Larger bookings, better demand conditions and the receding pandemic drove this moderate expansion.

Meanwhile, the composite PMI output rose to 53.5 in February from 53.0 in January, signaling a solid rate of expansion that was nonetheless below its long-term average, IHS Markit said.

“Growth in the services sector has not rebounded as significantly as many would have hoped given that COVID-19 cases have fallen significantly from the new surge in January and restrictions have been lifted. Activity in new businesses and services rose only modestly, and at the second weakest rate since last July. Based on anecdotal evidence from survey participants, inflationary pressures, input shortages and local elections have held back growth,” said Pollyanna De Lima, associate director of economics at IHS Markit.

Service Sector Output

The service sector kicked into high gear from January as COVID-19 cases declined and restrictions were lifted. New business and production grew at faster rates but were still below their respective long-term averages, IHS Markit said in the report. Although there has been a slight uptick in the business climate, job cuts have also taken place. Input costs and output prices increased at a slower pace.

There was a faster increase in new business inflows from service providers, but it was lower than the average seen over the history of the survey. Many companies said marketing efforts, resilient demand and winning new customers boosted sales, but growth was hampered by input shortages, the pandemic and local elections.

International demand for Indian services remained subdued in February.

“Relatively weak new business growth and lack of capacity pressure led some companies to cut staff in February. The latest decline in employment was the third in consecutive months and the fastest since July 2021,” the report said. Operating expenses were higher in February and service provider prices were revised upwards in February. The inflation rate for production fell to its lowest level in five months.

Business confidence strengthened in February, but the overall level of optimism has been historically subdued.

Composite PMI

Private sector output growth recovered some of the ground lost in January, the report said. While the rate of expansion has accelerated in both manufacturing and services, the former has seen a stronger rise.

“Similarly, new orders grew at faster rates among service businesses and goods producers, with the latter seeing the largest increase. At the composite level, the rate of expansion remained below trend, despite improving from January’s six-month low,” the report said.

Private sector employment continued to decline, but at a modest pace. The manufacturing and service economies have seen job cuts. Composite-level input cost inflation fell to its lowest level in five months in February, the report added.

Also Read: India’s Services Sector PMI Slows to 51.5, Composite PMI to 53 in January