India services PMI expands at fastest pace in 5 months on buoyant demand

Demand rose at the fastest pace in more than three years

India's services sector activity gained momentum and touched a five-month high in December, supported by uptick in new business orders that boosted output as well as employment, a monthly survey showed on Monday.

The IHS Markit India Services Business Activity Index improved from 52.7 in November to 53.3 in December, highlighting the second-strongest rate of increase in output in over a year, after July.

"The news of sustained job creation, robust new order growth and a pick-up in business confidence suggest that expansion can be maintained in the early part of 2020," said Pollyanna de Lima, Principal Economist at IHS Markit.

Survey members linked the rise to better market conditions and new business growth. Moreover, total sales expanded for the third consecutive month at the end of the year, and at the quickest pace since October 2016.

On the prices front, input costs increased further in December, with monitored firms citing higher charges for food, fuel, medical products and transport.
 

"Worryingly, inflationary pressures intensified, with the fastest rise in input costs for almost seven years pushing output charge inflation to a 22-month high," the survey said.

On the employment front, driven by rise in new business orders, service providers continued to hire extra staff in December and employment increased for the 28th month in succession.
 

The survey further noted that Indian services firms expect marketing efforts and favourable economic conditions to boost business activity during 2020. However, the overall level of positive sentiment remained below its long-run average.

Meanwhile, the Composite PMI Output Index that maps both the manufacturing and services sector, rose from 52.7 in November to 53.7, reflecting stronger rates of expansion in both the manufacturing and service sectors.

"With manufacturing sector weakness also fading in December, what was anticipated to be a disappointing private sector performance for the third quarter of fiscal year 2019/20 is now looking brighter," Lima said.

Lima, however, noted that growth looks set to be sustained, but at an unspectacular rate, with the latest quarterly PMI Composite Output Index reading broadly in line with that recorded in the three months to September."