March Services PMI contracts for ninth consecutive month

Activity in the largest segment of the Indian economy - services - failed to witness a pick-up in March, as contraction continued for the ninth straight month, HSBC Purchasing Managers' Index (PMI) data showed on Thursday.

The PMI for services stood at a three-month low of 47.5 points in March, compared with 48.8 points in February. A PMI reading below 50 shows contraction, whereas one above that indicates growth. In January, the index stood at 47.7 points.

Experts blamed the contraction in March on weak demand in the economy. “Following some stabilisation in recent months, services sector activity weakened again in March, led by softer domestic demand,” said Leif Eskesen, chief economist for India & the Association of Southeast Asian Nations, HSBC.

The coming Lok Sabha elections in India also had a role to play in a drop in the flow of new work in the sector.

The composite index —comprising manufacturing and services — fell to 48.9 points in March from 50.3 points in the previous month.

The PMI for the manufacturing sector plummeted to 51.3 points in March from 52.7 points in February, data released by Markit Economics, a financial firm, showed on Tuesday.

Out of six sub-sectors in services, three showed lower new business — financial intermediation, renting and business activity and transport & storage.

Pending work also rose during March. “Service providers linked the latest accumulation in the business outstanding to cashflow difficulties and delayed payments from clients, while manufacturers commented on raw material shortages,” the PMI survey noted.

However, inflationary pressures eased in March, as both input and output costs rose at a weaker pace. Service providers showed optimism on growth in services through the next one year. Eskesen predicted a gradual rise only by the second half of the current financial year, but only on the condition a stable government came to power at the Centre.

“Looking ahead, growth is expected to remain subdued in the coming months, but pick up gradually during the second half of 2014. This, however, assumes that the election outcome provides the elected government with a workable mandate,” said Eskesen.