Dec services PMI hits 10-month high

Data is indicative of solid expansion in output across the sector, says Markit, a financial information services provider

Activity in the services sector, the largest contributor to the Indian economy, accelerated to a 10-month high in December from flat performance in the previous month led by strong expansion in output across the sector, a private survey showed on Wednesday.

The Nikkei Services Purchasing Managers’ Index (PMI) for services showed an encouraging growth in December with a reading of 53.6 points against 50.1 in November. “The Indian private sector returned to expansion territory at the end of 2015, eking out modest output growth in December. A stronger rise in new business and an improvement in year-ahead expectations at service providers are positive developments, but the overall health of the economy remains fragile amid a weak manufacturing sector,” said Pollyanna De Lima, economist at Markit.

According to official data, the services sector posted an 8.3 per cent growth in the second quarter of 2015-16 against 8.1 per cent during the first quarter.

Solid output expansion was seen across the services sector, said the report based on survey of 350 private sector firms.

Output rose in four of the six broad areas of the service economy, the exceptions being hotels & restaurants, and transport & storage. The best-performing categories in December were ‘other services’ and financial intermediation. Leading services activity to increase was a solid rise in incoming new work, one that was faster than that seen in November.

The related survey based index for manufacturing released on Monday contracted for the first time in two years in December to 49.1 points from 50.3 in the previous month, as business conditions deteriorated on account of Chennai floods and also because of muted domestic demand.

The composite PMI, which takes into account both manufacturing and services, rose to 51.6 points in December from a five-month low of 50.2 in the previous month, which is indicative of a rebound in growth of private sector activity.

“Overall, the PMI data continue to portray a struggling economy, weighed down by weak underlying demand. Cost inflation continues to surpass charge inflation, highlighting the intense competitive environment,” said De Lima.