Service sector

Services sector activity at 11-year high in June

New Delhi: India’s services sector activity rose to its highest level since April 2011 amid continued improvement in demand conditions, although cost pressures in the services economy remained stubbornly high, according to a monthly survey released on Tuesday.

The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from 58.9 in May to 59.2 in June, its highest level since April 2011. For the eleventh consecutive month, the services sector saw an expansion of its output. In Purchasing Managers’ Index (PMI) parlance, a number above 50 signifies expansion while a score below 50 indicates contraction.

“Demand for services has improved to the greatest extent since February 2011, supporting a robust economic expansion for the sector in the first quarter of FY 2022/23 and paving the way for another substantial recovery in production. next month,” Pollyanna De Lima said. , Associate Director of Economics at S&P Global Market Intelligence.

According to the panelists, the recovery stems from the continued improvement in demand following the removal of pandemic-related restrictions, capacity expansion and a favorable economic environment. Businesses were able to secure new orders despite charging extra for their services. Data from June showed the fastest rise in selling prices since July 2017, with several companies seeking to pass on some of their additional cost charges to customers.

“Cost pressures in the services economy remained stubbornly elevated in June, despite hitting a three-month low. With businesses retaining significant pricing power, due to robust demand conditions, charge inflation at the production hit an almost five-year high,” Lima said. . According to the survey, the continuation of inflation continues to worry companies, which are cautiously optimistic about the outlook for activity in the year ahead. The overall level of confidence was well below its long-term average, with only 9% of companies expecting production growth.

“Relentless inflation has somewhat worried service providers, who have been cautious in their forecasts. On average, business activity is expected to increase over the next 12 months, but the overall level of sentiment has remained historically low,” Lima said. On the employment front, some companies responded to capacity pressures by hiring additional staff in June, but the vast majority (94%) left payroll figures unchanged. Overall, employment in services increased slightly, following a decline in May. Meanwhile, the S&P Global India Composite PMI Output Index – which measures the combined output of services and manufacturing – was 58.2 in June, little change from 58.3 in May. “Indian S&P private sector output growth stabilized in June as a faster increase in services activity offset a slower increase in industrial output,” the survey said.