Competition, rains drag services activity to 5-month low in October

India's services PMI slipped to 58.9 in October, a five-month low, as competition and rains slowed growth even as demand and GST relief supported business optimism

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Business activity in India’s dominant services sector fell to a five-month low in October as competition and heavy rains constrained growth, even though demand buoyancy and goods & services tax (GST) relief led to an improvement in operating conditions, said a private survey on Thursday.

 

The headline HSBC India services purchasing managers’ index (PMI) figure, compiled by S&P Global, fell to 58.9 in October from 60.9 in September. This comes after the index held above 60 for four consecutive months.

 

“October data showed softer, although still substantial, expansions in Indian services output and new business. Still, companies were strongly confident of a rise in business activity over the course of the coming 12 months,” the survey noted.

 

The PMI has been above the neutral 50 mark, which separates contraction from expansion, for 51 months straight.

 

Pranjul Bhandari, chief India economist at HSBC, said that competitive pressures and heavy rains were cited as contributors to the sequential slowdown.

 

“That said, the services PMI is still running well above the neutral level of 50 and its long-run average. Input costs notably increased at the slowest rate in 14 months, which provided some relief for firms. Meanwhile, India’s composite PMI fell on a sequential basis from 61.0 in September to 60.4 last month, largely due to the slowdown in the services sector,” she added.

 

New business intakes rose sharply, albeit to the least extent in five months. Once again, firms attributed the slowdown to heightened competition, floods and landslides.

 

On the export front, the survey noted that international demand for Indian services improved further, as signalled by another increase in external sales.

 

“The rate of expansion was solid, though the weakest since March. Offering respite to firms, input costs rose at the slowest

 

rate in 14 months. Where an increase was reported, companies signalled greater outlays on fruits, construction materials, maintenance and vegetables. The upturn was curbed by the GST reform, panel member comments showed,” the survey said.