Services PMI falls to 3-month low in Aug after post-election boost

Growth in services, the dominant sector of the economy, fell to a three-month low in August, as order inflows moderated, showed the HSBC Purchasing Managers’ Index (PMI).

For August, the PMI was 50.6 points, against 50.2 in May, 54.4 in June and  52.2 in July; this was the fourth consecutive month of expansion in the sector. A reading of more than 50 shows expansion.

Frederic Neumann, co-head (Asian economic research), HSBC, said, “Growth in services sector activity slowed in August. Services activity is once again turning down, following a swift post-election uptick, suggesting an improvement in reforms momentum is needed to lift the sentiment in the sector.”

The services PMI reading, based on a survey of about 350 private companies, came a few days after official data showed India’s services sector expanded 6.8 per cent in the quarter ended June this year, against 7.2 per cent in the year-ago period. Taking into account the manufacturing PMI reading of 52.4 points for August, the composite index for that month fell to 51.6 points in August from 53 in July.

Markit Economics, which compiled the data for the PMI, said growth in the services sector was broad-based; the hotels & restaurants segment alone saw contraction. This segment, along with other trade sectors, recorded growth of two per cent, for the first quarter of this financial year, according to official figures.

According to the PMI survey for August, expansion in the post & telecommunications segment was the most.

Workforce numbers in the services sector remained unchanged, with a vast majority of survey participants indicating no change in employment. Overall, staffing levels in the private sector remained broadly stable, as was the case through the past five months.

The backlog of work at services companies continued to increase in August, extending the accumulation to six consecutive months. The rate of increase, however, was modest. For services companies, input costs increased in August, though the rate of price rise fell to the lowest since July 2013. Respondents suggested higher input costs primarily resulted from rising oil prices.

In August, private companies, including those engaged in manufacturing, recorded a slowdown in cost pressures compared to the previous month. For services companies, inflation in output prices in August was the lowest since May 2013.

Expectations on activity at service providers remained positive. The firms surveyed anticipated a rise in demand, as well as various planned marketing initiatives.