You are here: Home » Economy & Policy » News
Business Standard

India's August services PMI falls from 21-month peak on weakest growth

The seasonally adjusted Nikkei India Services Business Activity Index, fell from July's peak of 54.2 to 51.5

Services Pmi  |  Inflation  |  Gdp Data

Press Trust of India  |  New Delhi 

Services PMI

India's services sector activity fell in August from July's 21-month peak as new business orders declined, following which firms raised their staffing levels at a modest pace amid rising input cost inflation, a monthly survey said Wednesday.

The seasonally adjusted Nikkei India Services Business Activity Index, fell from July's peak of 54.2 to 51.5 in August owing to weakest growth in new work in three months.

In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

"August data signalled that the pace of growth in India's service economy cooled from July's recent peak. This was matched by the slowest expansions in new business and employment since May and November 2017, respectively," said Aashna Dodhia, Economist at IHS Markit, the author of the report.

Meanwhile, the headline seasonally adjusted Nikkei India Composite PMI Output Index fell to 51.9 in August from July's 21-month high of 54.1, owing to weaker growth in both the manufacturing and service sectors.

On the price front, input cost was the strongest in nine months. On a positive note, business confidence rose to the highest level since May.

"Input cost in the service sector accelerated to the sharpest since November 2017, fuelled by higher oil-related prices," Dodhia said adding that firms faced pressure on their margins as they were unable to fully pass on higher cost burdens to price sensitive customers.

The Reserve Bank of India in its August policy review, raised benchmark short-term lending rate (repo) by 25 basis points to 6.5 per cent citing inflationary concerns. It was the second such hike in a row.

Meanwhile, business confidence remained positive in August and was driven by upbeat forecasts of sales, an expected improvement in demand and promotional activities, the survey noted.

"On another positive note, business sentiment towards the 12-month outlook strengthened to a three-month high, with stronger confidence seen among service providers," Dodhia said.

"Amid reports of strong demand conditions, the overall economy registered in expansion territory for the sixth consecutive month," she added.

According to official data, the Indian economy grew at a two-year high of 8.2 per cent in the April-June quarter of current fiscal on good show by manufacturing and farm sectors.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, September 05 2018. 11:48 IST