Services PMI falls marginally to 58.4 in Nov, job creation improves

Business confidence leads to 'hiring surge' as input costs rise to the 'greatest extent' in 15 months

Growth in India's dominant services sector dipped in November as new orders and output receded, while consistent demand led to a rise in business sentiment and "hiring surge", said a business survey on Wednesday.

 

The headline Purchasing Managers’ Index (PMI) figure, compiled by S&P Global and released by HSBC, was 58.4 in November, almost unchanged from 58.5 in October but lower than a preliminary estimate of 59.2. The index has been above the neutral 50-mark that separates contraction from expansion for the 40th month straight.

 

"Survey participants remarked on demand strength and new business gains," said the survey. It noted that respondents continued to report improving international demand for their services, with new export orders increasing at a rate that was the quickest in three months but below those seen around mid-year.

 

"Where growth was reported, firms noted gains from clients in Asia, Europe, Latin America and the US."

 

Pranjul Bhandari, chief India economist at HSBC, said employment in the services sector grew at the fastest pace ever since the survey began in 2005.

 

"The hiring surge reflected the sector’s improving business confidence, growing new orders, and vigorous international demand. At the same time, high food and labour costs drove up input and output prices to their fastest rates in 15 months and nearly 12 years respectively," she said.

 

Services firms continued to expand their operating capacity through recruitment drives, seeking to accommodate new business. Anecdotal evidence highlighted a combination of permanent and temporary hires in November, according to the survey.

 

It noted that the downside to this "unprecedented upturn" in job creation was an intensification of price pressures as input costs rose to the "greatest extent" in 15 months, while selling prices increased at the fastest rate in close to 12 years.

 

"This intensification of cost pressures reportedly prompted service providers to lift their own charges in November. On some occasions, companies suggested that hikes were supported by rosy demand. Output prices increased at the fastest rate in close to 12 years," said the survey.