Services PMI in March falls to 17-month low

Growth in India’s services sector fell to a 17-month low in March, showed the HSBC purchasing managers’ index (PMI) released on Wednesday. If official data matches the PMI reading, the government’s hopes of an economic recovery in the quarter ended March would be dashed.In March, PMI for services fell to 51.4 points, compared with 54.2 points in February. With manufacturing PMI reported at a 16-month low of 52 points, the composite PMI for India in March stood at 51.4 points, also a 17-month low. In February, it stood at 54.8 points.

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

In March, though the new work intake in the services sector rose for the 17th consecutive month, the expansion was slow. Outstanding business across private services companies rose; persistent power cuts contributed to unfinished business volumes.

The companies surveyed said more new business resulted in higher backlog. The sector’s employment rate has been growing for 13 consecutive months. In March, the rise in employment was moderate.

Cost inflation was high; services companies responded by increasing prices. Inflation for final products was lower than in February.

“Growth in services sector activity slowed notably due to a deceleration in new business flows. Moreover, backlog and hiring rose at a slower pace. Even so, businesses remained confident about the future,” said Leif Eskesen, chief economist for India and the Association of Southeast Asian nations, HSBC.

He added inflation for input prices and final products was lower. “Despite this, the scope for further policy rate cuts is limited, and the next cut may well be the last,” Eskesen said.

Indian service providers were optimistic about this financial year — the degree of confidence was the highest since December 2012, owing to expectations of strong demand and planned investment in marketing.

For the services PMI, Markit Economics, the firm that compiles the index, surveyed about 350 private companies.

Earlier, official data showed the eight core sectors, which account for 38 per cent of the Index of Industrial Production (IIP), contracted 2.5 per cent in February, the first contraction since July 2005.