Services activity improves in September, PMI at 49.8 vs 41.8 in August

The seasonally adjusted India Services Business Activity Index rose for the fifth straight month in September, from 41.8 in August to 49.8.

The latest reading was indicative of broadly stable output across the sector. Monitored companies that observed growth commented on the reopening of business units amid the loosening of lockdown rules. Firms that reported a contraction mentioned the damaging impact of the pandemic on demand.

Signs of stabilisation in services are likely to provide more comfort to policymakers after a sister survey on Thursday showed India’s manufacturing expanded at its fastest pace in over eight years, suggesting business conditions were gradually returning to normal in Asia’s third-largest economy.

The Nikkei/IHS Markit Services Purchasing Managers’ Index bounced to 49.8 in September from August’s 41.8, a touch below the 50 mark that separates expansion from contraction on a monthly basis.

But September was the seventh straight month that activity had contracted, the longest such stretch since a 10-month run to early 2014. “The relaxation of lockdown rules in India helped the service sector move towards a recovery in September. Participants of the PMI survey signalled broadly stable business activity and a much softer decline in new work intakes,” Pollyanna De Lima, economics associate director at IHS Markit, said in a release.

The services sector accounts for around 55% of India’s economy and nearly a third of its jobs.

Even if restrictions are eased further, the economy is unlikely to return to pre-COVID-19 levels in the coming year as people remain cautious about discretionary spending and millions more are pushed into poverty.

PMI for services rose to 41.8 in August, compared to 34.2 in July, remaining eight points below the 50-point mark that separates contraction (below 50) from growth (above 50).

Meanwhile, the manufacturing sector activity improved for the second straight month in September and touched an over eight-and-a-half-year high supported by accelerated increases in new orders and production, even as firms reduced staff numbers, a monthly survey said on Thursday.