India's services PMI eases to 60.9 in Sep amid weak international demand

Services PMI: Exports increased in September, but at their slowest pace since March, with firms saying that competitive conditions and cost-control measures were limiting growth

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India’s services activity expanded for the twenty-sixth consecutive month in September, though the pace of growth eased due to weaker international demand, according to the HSBC India Services PMI data compiled by S&P Global released on Monday. The seasonally adjusted index stood at 60.9 in September, down from 62.9 in August, but well above the neutral mark of 50, signalling robust expansion.

 

Chief India Economist at HSBC Pranjul Bhandari said, "Business activity in India’s services sector eased in September from the recent-high August level. Most trackers moderated but nothing in the survey suggested there is a big loss in growth momentum in services. Instead, the Future Activity Index rose to its highest level since March, indicating strengthening optimism services companies about business prospects."

Competition limited growth

New orders continued to rise in September, but not as quickly as in August. Part of the slowdown came from weaker growth in international demand for Indian services. Exports still increased, but at their slowest pace since March, with companies saying that competitive conditions and cost-control measures were limiting growth.

Job creation slows

Job creation also slowed, with fewer than 5 per cent of companies reporting hiring growth, the report said. Additionally, prices charged for services rose slowly, marking the slowest increase since March.

 

Services firms also saw higher costs at the end of the second quarter, especially for labour and materials. Overall inflation remained steady but was lower than the previous month and below its long-term average.

Growth outlook

Despite these slowdowns, business optimism improved in September, reaching a six-month high. Companies cited factors like advertising, efficiency improvements, competitive pricing, and tax cuts as positive drivers for growth.

Manufacturing PMI eased to 57.7

India’s manufacturing activity also expanded at a slower pace in September, with the Manufacturing Purchasing Managers’ Index (PMI) easing to 57.7, from 59.3 in August, according to data compiled by S&P Global. The September manufacturing PMI reading marked the weakest improvement in sector health since May, though it remained well above the neutral 50 threshold that separates expansion from contraction.

Composite PMI slips to 61.0

Owing to a slowdown in both manufacturing and services segments, the HSBC India Composite PMI Output Index also slipped to 61.0 in September from 63.2 in August, indicating the weakest rate of expansion since June. In addition to a broad-based slowdown in growth of output across the manufacturing and service sectors, there were softer increases in new orders across the two segments. At the composite level, total sales rose at the softest pace in three months.