Services PMI rises to three-month high

Rise in new business helps services rebound after near-flat activities in June; index rises to 51.9 points

Services sector activities recovered to a three-month high in July on the back of new business growing at a faster pace, widely-tracked Nikkei/Markit purchasing managers’ index (PMI) showed. Companies, however, refrained from hiring new hands.

The PMI rose to 51.9 points in July from 50.3 points in June, which was the weakest since November 2015. The seasonally adjusted index is a composite single figure indicator of service-sector performance. A reading above 50 represents expansion, while one below this level means contraction.

Growth of new business, which was at its most pronounced level since April, boosted output growth, the survey noted. Likewise, manufacturing order books increased at the quickest pace since March, outweighing the recent slowdown in services and, therefore, contributing to a quicker expansion in private sector new business.

The July data highlighted a second consecutive monthly increase of outstanding business at service providers. This was mostly due to delayed client payments, respondents said.

The survey showed June was no different for job creation, with almost all survey members reporting the same staff levels. It has now been two-and-a-half years since the private sector has seen meaningful job creation, the same staffing levels as in June, the survey noted.

Amid reports of lower prices paid for fuel and some commodities, average input costs facing service providers fell in July. The decrease was the first since September 2015 and the rate of reduction was slight. Conversely, purchasing costs at goods producers’ end continued to rise, although the rate of inflation softened to a five-month low.

The improving demand environment-enabled service providers to continue to pass on to their clients’ part of the additional cost burden. However, output charges fell at a slight rate.

“The Indian service economy started the second semester on a solid footing, posting its strongest performance since April and thereby indicating that underlying demand conditions remained reasonably firm,” said Pollyanna De Lima, economist at Markit and author of the report.

Business sentiment among Indian service providers improved in July, with the degree of optimism reaching a four-month high.

The government had said earlier that policy enablers like maintaining regularity. Transparency in services sector data also needed to come in first. Currently, the Directorate General of Commercial Intelligence and Statistics and the Reserve Bank of India compile the data. The country currently accounts for less than two per cent of the global exports and comes in as the eighth largest services exporter.