Strongest increase of services activity in over 7 years: IHS Markit

February data pointed to another improvement in the rate of growth of services activity as companies reacted positively to strong gains in new work, according to IHS Markit India Services Purchasing Managers' Index (PMI) released on Wednesday.

The welcoming news was accompanied by a renewed increase in new export orders and strengthening business confidence. Meanwhile, price data showed a marked but softer upturn in input costs and only modest rate of output charge inflation.

The IHS Markit India Services Business Activity Index increased for the fifth successive month in February -- from 55.5 in January to 57.5 -- after dipping to a 19-month low in September 2019.

The latest figure highlighted the quickest expansion in services output since January 2013.

Those companies that reported higher business activity commented on strengthening demand, supportive economic conditions and accommodative public policies.

Service providers enjoyed a marked increase in new work intakes during February, the second-fastest in over seven years. In some cases, the upturn in sales was linked to successful advertising.

As was the case for business activity, the rise in new orders was widespread across the five monitored categories and led by consumer services.

A return to growth of new orders from abroad contributed to the increase in total sales. The pace of expansion in international demand for Indian services was moderate, but above its long-run average.

Projects in the pipeline, supportive market conditions, marketing efforts and the offering of new services all contributed to a stronger degree of optimism among firms that output will increase in the year ahead. Finance, insurance and consumer services firms were the most confident during February.

"Positive gains in new work across the manufacturing and service sectors suggest that private sector output will likely increase markedly again in March, boding well for final quarter GDP following expectations of a flat growth rate in Q3 FY 2019-20," said Principal Economist at IHS Markit Pollyanna de Lima.

February data also showed that robust increases in both manufacturing and services output pushed the growth of private sector business activity to an eight-year high.

The Composite PMI Output Index was up from 56.3 in January to 57.6, remaining above its long-run average of 54.6. Growth of aggregate new orders held close to January's seven-year high.

Robust increases were noted among goods producers and service providers, with the sharper rate of expansion among the former.

The IHS Markit India Services PMI is compiled from responses to questionnaires sent to a panel of around 400 service sector companies. The sectors covered include consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services.

The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.

IHS Markit is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government.

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