Services sector growth steady in May as export demand remains strong: PMI

Record hiring in sector as companies 'heavily increase' staff recruitment, says survey

India's dominant services sector maintained its growth in May, helped by strong export demand and record hiring, said a private survey on Wednesday.

 

The HSBC India services purchasing managers' index (PMI), compiled by S&P Global, stood at 58.8 in May, marginally up from 58.7 in April. The index has been above the neutral 50 mark, which separates contraction from expansion, for 46 months straight.

 

“A key area of strength was exports, with survey participants reporting one of the strongest improvements in international demand in 19-and-a-half years of data collection," said the survey.

 

Growth was helped by healthy demand conditions, new client wins and greater staffing capacity. New orders rose at a sharp pace, largely aligning with those registered from February to April.

 

"Advertising, demand strength and repeat orders from existing clients were some of the reasons panellists gave for the upturn in sales," said the survey.

 

Pranjul Bhandari, chief India economist at HSBC, said that services PMI in May was broadly in line with readings in recent months. 

 

Companies observed a near-record improvement in international demand for their services in May. "Over the course of the survey's 19-and-a-half-year history, faster increases in new export orders were only recorded in May and June 2024. When citing sources of growth, firms mentioned Asia, Europe and North America in particular," said the survey.

 

It noted that almost 16 per cent of panellists reported higher payroll numbers, while 1 per cent indicated a fall. The resulting overall rate of job creation was the strongest in the survey’s history.

 

The increase in workforce numbers, coupled with overtime payments, added to firms' cost burdens though. Some companies also cited greater outlays on cooking oil, material and meat.

 

"To keep up with swelling demand, India’s service providers heavily increased staff recruitment. Indeed, the employment index rose to the highest reading ever recorded by this survey. Meanwhile, price pressures continued to intensify with input prices and charged prices both rising last month," said Bhandari.

 

The sector’s growth comes in the backdrop of manufacturing activity decelerating to a three-month low in May on account of cost pressures, fierce competition and the India-Pakistan conflict. Manufacturing PMI slipped to 57.6 in May from 58.2 in April.