Services PMI at 3-month low in February

New orders failed to keep up with January's blistering pace although companies remained optimistic about future business

 

In February 2013, the widely-tracked Purchasing Managers’ Index (PMI) eased to a three month low of 54.7 points. In January 2013, the services PMI reading was at a year’s high of 57.5 points.

The manufacturing PMI in February 2013 had registered a reading of 54.2, as against its reading of 53.2 in January 2013.

The HSBC India composite output index which combines both the PMI services and PMI manufacturing too experienced a decline. From its reading of 56.3 in January, it fell to 54.8 in February.

A PMI reading of more than 50 points shows an expansion, while a reading below 50 indicates a contraction.

The Services PMI for February 2012 was lower than that of its reading in February 2013, at 54. Though there was a growth in output in the manufacturing sector, service providers experienced a slowdown. Output growth is largely because of the rise in new orders. Unfinished business levels expanded at its fastest pace in 32 months. There was also more recruitment in the services sector.

The services providing companies were optimistic about their prospects in the next one year. While 42% of the surveyed companies anticipated higher activity in the next one year, 3% of the companies expect a fall.

The economic survey 2012-13 had predicted that India’s industrial growth is likely to improve. Economists say that the services PMI should be considered as a broad barometer of India’s services sector, and that it is unlikely that it would match the official data. The difference is partly because the PMI is based on a survey of private companies, and relies on a month-on-month calculation, while the official data is annual.

For the PMI index, around 350 companies in the services sector and around 500 companies in the manufacturing field are surveyed. In December, the PMI services reading had reached a three month high.

“Activity in the services sector grew at a slower clip led by a deceleration in new business, but backlogs of work still increased.” Leif Eskesen, Chief Economist for India and ASEAN at HSBC said.

Economists had expected growth to pick up in the final quarter of the current fiscal year. But, though the manufacturing sector accelerated, the growth in the services sector is at a slow pace.  In private sector companies, the input and output prices rose. The inflation rate was the highest in seven months.

“Input price inflation picked up notably, which was passed onto prices charged. The numbers underscore that the room for monetary policy easing is very limited.”, Eskesen said.

The panelists think that in the coming year, because of the improving global economy and the improved quality of services and marketing, the services sector will experience a growth.