Strongest rise in February 2015 services activity for eight months: HSBC Services PMI

Rising output was recorded in four of the six broad areas of the service economy

The headline HSBC India Composite PMI Output Index increased marginally from January's reading of 53.3 to 53.5 in February 2015. This signalled a solid rise in private sector output. Whereas services activity expanded at a faster pace, growth of manufacturing production moderated.

At an eight-month high of 53.9 in February (January: 52.4), the seasonally adjusted HSBC India Services Business Activity Index indicated a solid expansion of output across the sector. Strong new business growth was the primary factor cited by survey respondents for the increase in activity. Rising output was recorded in four of the six broad areas of the service economy, the exceptions being Financial Intermediation and Transport & Storage.

New business received by Indian service providers increased markedly in February, amid evidence of strengthening demand conditions, weaker inflation rates and market stability. Furthermore, the growth rate was the fastest since June 2014. Among the six monitored categories, Financial Intermediation was the only sub-sector to post falling incoming new work. Growth of manufacturing new orders softened during the month.

Outstanding business across the Indian private sector rose for the twelfth successive month in February. That said, the rate of accumulation was only slight. The rise in backlogs of work was broad-based by sector, with manufacturers and services firms registering increases.

Amid reports of shortages of skilled workers, services employment was broadly unchanged from the levels registered in the previous month. This ended a two-month sequence of job creation in the sector. Manufacturing employment fell, albeit at a slight pace.

Having accelerated in the prior month, input cost inflation across the Indian service economy moderated during February. The rate of increase was only slight and well below the series average. Higher food and wage costs contrasted with reduced fuel prices. Meanwhile, manufacturers signalled the first decrease in input prices in almost six years.

Service providers in India indicated that output prices increased for the third successive month. The rate of charge inflation was, however, slight overall and softer than that seen in January. At the private sector overall, output prices rose at a modest pace that was well below the series average.

Meanwhile, positive sentiment towards services output growth in the year ahead was sustained in February. Almost 26% of panellists anticipate higher business activity over the course of the next year, which they commonly linked to improved market conditions, low inflation rates, increased marketing and favourable exchange rates. Nonetheless, the level of positive sentiment fell since January.

Commenting on the India Services PMI survey, Pollyanna De Lima, Economist at Markit said, Boosted by a solid rise in new work, service sector output in India expanded at a robust rate in February that was the strongest since mid-2014. Nonetheless, the latest improvement in economic prospects across the sector is yet to feed through to the labour market, as employment was little-changed over the month."

"Manufacturers saw both production and order book volumes increase at slower rates. Nonetheless, private sector output growth picked up pace since last month. Reflecting lower fuel prices, overall costs faced by services firms rose at a softer rate. However, with demand gaining strength, the RBI is likely to remain cautious when deciding on interest rates," Pollyanna De Lima added.

Powered by Capital Market - Live News