Growth of services activity, sales and jobs soften in August: IHS Markit

Business conditions in the Indian service sector remained conducive to economic growth in August with PMI data highlighting sustained increases in activity, sales and employment, according to IHS Markit India Services Purchasing Managers' Index (PMI) released on Wednesday.

However, in all three cases, rates of expansion softened from July. Inflationary trends were mixed, with a slower increase in input costs contrasting with a faster upturn in charges. Meanwhile, supportive public policies and predictions of better demand pushed business sentiment up to a one-year high.

The IHS Markit India Services Business Activity Index declined from 53.8 in July to 52.4 in August, pointing to a slower rate of increase in output. The upturn was modest and below its long-run average. Companies that signalled growth commented on favourable government policies, improved technology and new business gains.

Mirroring the trend for output, new business inflows rose at a softer pace in August. Growth was, however, sustained in four of the five monitored sub-sectors, the sole exception being real estate and business services.

"The weaker PMI readings for India's service sector match the trend noted in the manufacturing industry, bringing unwelcome news of a cooling economy halfway through the second quarter of fiscal year 2019-20," said Principal Economist at IHS Markit Pollyanna de Lima.

"An important development, however, is evident in a rebound in business sentiment. Both manufacturers and service providers believe that supportive public policies can help shift growth momentum into a higher gear in the coming 12 months," she said in a statement.

Meanwhile, the growth of Indian private sector activity eased from July's eight-month high, reflecting a slowdown in new business gains. Growth lost momentum in both the manufacturing and service economies.

At 52.6 in August, the Composite PMI Output Index posted in expansion territory for the 18th month in a row. However, falling from 53.9 in July, the latest figure was consistent with a slower and only moderate rate of increase.

Similarly, the growth of aggregate new orders moderated from July and was modest. As was the case for output, softer rates of expansion were evident in the manufacturing and service sectors.

Private sector jobs rose further in August but the pace of expansion eased. For the second month running, the stronger rate of increase was noted in the service economy.

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