India’s service sector output was recorded at 51.5 in January, down significantly from 55.5 in December. IHS Markit in its report said the overall figure indicated the slowest expansion in the current six-month growth streak. Meanwhile, the composite PMI output fell from 56.4 in December to 53.0 in January, the slowest rate of expansion in the current six-month growth period.
“The escalation of the pandemic and the reintroduction of curfews negatively impacted growth across the services sector. New business and production grew at slight rates that were the weakest in six months. Concerns about the duration of the current wave of COVID-19 have undermined business confidence and caused job cuts. Businesses have also been alarmed by price pressures,” said Pollyanna De Lima. , Associate Director of Economics at IHS Markit.
Service Sector Output
The growth of new businesses and production has been dampened by the escalation of the pandemic. Job cuts continued and business confidence took a hit last month. After declining in December, the rate of input cost inflation has reached its highest level in more than 10 years. Production-related expenses increased at a moderate pace but faster than in December.
New labor inflows rose again at the start of the year, but the rate of growth was weak and the weakest in six months. Demand has been limited due to rising COVID-19 cases, the report adds. “Business sentiment remained positive, but slipped to a six-month low,” he said.
The overall inflation rate reached its highest level since December 2011 for service providers. Many companies said additional cost charges were passed on to customers.
“Jobs in the service sector fell for the second consecutive month in January, due to reduced production requirements by some companies and future uncertainty,” IHS Markit said. This indicates that there has been an increase in ongoing business among companies. The accumulation of arrears, however, was only small.
While travel restrictions have dampened international demand for Indian services, new export business has fallen only at a moderate pace.
“Growth in business activity in the Indian private sector was strong at the start of the year, but has lost significant momentum. The composite PMI for production fell to 53 from 56.4 in December, 0 in January, signaling the slowest rate of expansion in the current six-month growth period. Services activity and manufacturing output grew at slower rates,” the report said.
As new orders continued to rise, the rate of expansion hit a six-month low for private sector companies.
Private sector employment fell for the second consecutive month. Job cuts accelerated from December and input cost inflation accelerated in January.
“Prices charged by private sector firms also increased at a faster pace in January, although moderate and in line with its long-term average,” the report said.
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