Services PMI in growth zone after 10 months

Rises to 50.2 points in May from 48.5 in April on increased orders

The services sector returned to growth in May on increased orders, after contracting for 10 months, according to the HSBC Purchasing Managers’ Index (PMI). The index rose to 50.2 points in May from 48.5 in April.

Any reading above 50 points indicates an expansion and any below indicates a contraction. The growth is fragile but “fortunately, this momentum will be further supported by the strong election results”, said Frederic Neumann, co-head of Asian Economic Research at HSBC.

That said, the increase in activity was weak in the context of historical data, noted Markit Economics, the financial information agency which compiles the PMI data. The survey covers about 350 companies, all non-government.

Divergent trends were seen at the sub-sector level, with only post & telecommunication and renting & business activities registering higher output, it said. The composite output index, comprising both manufacturing and services, rose to 50.7 points in May from 49.5 in the previous month. It shows expansion for the first time in three months.

Supporting the rise in services activity was a rebound in new orders. The rate of expansion in incoming new work was, however, slight overall.

Order book volumes placed with manufacturers also rose, leading to higher new business across the private sector as a whole, said Markit. Service providers were optimistic in May that activity would increase over the next 12 months.

Marketing campaigns, the end of the elections and the launch of new services are expected to promote new business growth and, therefore, output. The May data indicated staffing levels in the Indian private sector were broadly unchanged. Workforce numbers increased at manufacturing firms but stagnated in the service economy.

Both input and output inflation eased to the weakest since July 2013.