India services sector PMI edges down to 56.5 in January

After ending 2024 on a strong footing, service providers in India recorded a loss of growth momentum in January. New business intakes rose at the slowest pace since November 2023, curbing the upturn in business activity.

Nevertheless, rates of expansion remained historically high and more jobs were created. Also, the degree of business sentiment was in line with its trend.

As for prices, cost burdens increased to broadly the same extent as in December, with firms largely reporting greater payroll expenses. Meanwhile, charge inflation ticked higher.

At 56.5 in January, the seasonally adjusted HSBC India Services PMI Business Activity Index indicated a sharp rate of expansion. However, the headline figure was down from 59.3 in December to its lowest level since November 2022.

Several companies linked output growth to favorable demand conditions, new business wins and investment in technology. However, a few firms suggested that activity levels at their units were constrained by a fall in customer numbers.

India's private sector economy lost some growth momentum in January, as a quicker increase in factory production was more than offset by a softer expansion in services activity. The HSBC India Composite Output Index fell from 59.2 in December to a 14-month low of 57.7.

The latest figure nevertheless remained above the long-run series average and was therefore consistent with a robust upturn. Aggregate sales increased at the slowest pace since last September, albeit one that was sharp. A pick-up in growth of factory orders contrasted with the weakest rise in services sales since November 2023.

For the third straight month, services companies noted stronger cost pressures than goods producers. Across the private sector, the latest rise in input prices was the least pronounced since October 2024 and below its long-run average.

As for selling charges, the overall rate of inflation was broadly similar to December as a slowdown at goods producers offset an intensification at service providers.

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