India's services PMI hits 59.3 in December, ending 2024 on a high note

Services PMI December 2024: Underlying demand identified as the primary factor behind output growth, says HSBC India Services PMI, compiled by S&P Global

India’s Services Purchasing Managers' Index (PMI) for December 2024 rose to 59.3 points, an increase from 58.4 points recorded in November, signalling growth in the country’s services sector. Continued demand buoyancy propelled new business inflows, supported output growth, and encouraged firms to expand their workforce, the HSBC India Services PMI, compiled by S&P Global, reported on Monday.

 

The HSBC India Services Business Activity Index rose to 59.3 in December from 58.4 in November, marking the strongest expansion in four months, the report said.

 

High demand main driver for growth

Underlying demand was identified as the main driver behind the output increase, with new orders climbing for the forty-first consecutive month. Companies attributed this growth to efforts in expanding capacities, which in turn enabled them to handle more work.

 

The finance and insurance sectors led growth in the services sector with the highest growth in new orders and business activity.

 

Ines Lam, economist at HSBC, said, “India’s services companies expressed strong optimism in December as business activity growth surged to a four-month high. Forward-looking indicators such as new business and future activity suggested that the strong performance will likely continue in the near future. The easing of input price inflation in the month also supported business sentiment. Strength in the services PMI stands in contrast with the growing signs of a slowdown in the manufacturing industry.”

 

Cost burdens soften in December

December 2024 witnessed a softer rise in cost burdens, despite continued reports of increased spending on food, labour, and materials. Selling price inflation also eased, though it remained above its long-run trend.

 

“Although services companies continued to see their business expenses rising in December, the rate of inflation softened from November’s 15-month high,” the report said. Consumer services firms faced the highest cost pressures, while charge inflation was most pronounced in the transport, information, and communication categories.

 

The rate of input cost inflation across the private sector economy also softened, leading to a slower rise in prices for goods and services. However, firms faced increased backlog volumes, reaching a seven-month high, indicating sustained pressure on capacities.

 

International orders for services also grew in December, however at a slower pace than in previous months.

 

Manufacturing PMI hits 12-month low

India’s manufacturing PMI for December 2024 slipped to a 12-month low at 56.4. The drop was attributed to softer expansion rates in production and fresh business orders. The lowest manufacturing PMI in 2024 was earlier observed in November and January 2024, at 56.5. 

 

The HSBC India Composite Output Index, which includes both services and manufacturing sectors, rose to 59.2 in December from 58.6 in November.

 

A PMI reading above 50 indicates expansion, while a figure below 50 signifies contraction.