Services sector picks up, but not in jobs

After a 20-month low in April, the services sector has been picking up and its growth was at a three-month high in July, despite elevated inflation and interest rates, according to the widely-tracked HSBC purchasing managers' index (PMI). Services are the largest portion of the economy.

The PMI for services was up at 58.2 points in July, compared to 56.1 in June. This was mainly due to acceleration in new work intakes to a five-month high. Index ratings above 50 points signify growth.

Though manufacturing PMI for July was at a 20-month low, the growth in services has more than neutralised the dismal performance in factory output. So, the composite PMI covering both manufacturing and services saw acceleration to 57.9 points in July, versus 56.8 in June.

The Prime Minister's Economic Advisory Council has projected services to grow by 10 per cent this year against 9.4 per cent a year before. However, manufacturing growth was pegged at only seven per cent against 5.8 per cent earlier.

Job growth in services was only fractional, whereas manufacturing saw a rise in employment for the first time since October 2009. It is also why the government is focusing on a national manufacturing policy to increase its share in GDP to 25 per cent from the current 16 per cent over 10 years.