Services PMI falls to 14-month low in March amid West Asia conflict

Growth momentum eased for a second month as output and sales slowed, while rising input costs and the West Asia crisis weighed on demand and business activity

Growth in India’s services sector activity dropped to a 14-month low in March as output and sales slowed and input price inflation picked up amid the West Asia crisis, according to data compiled by S&P Global on Monday.

 

The HSBC India Services Purchasing Managers’ index (PMI) fell to 57.5 in March, down from 58.1 in February. The March reading was the lowest since January 2025, when it was 56.5.

 

What does the latest services PMI reading indicate?

 

“While new business gains continued to underpin growth, according to panellists, output was constrained by the detrimental impact of the Middle East war on demand, market conditions and tourism,” said a release by S&P Global.

 

 

The reading for March remained above the 50-mark, which indicates expansion in activity, while a reading below 50 signifies contraction. The headline figure has been in the expansion zone for the 56th month running.

 

"India’s services sector stayed in expansion in March, but growth momentum eased for a second consecutive month. Demand remained resilient, led by new export orders, which rose to the greatest extent since mid-2024,” Pranjul Bhandari, chief India economist at HSBC, said.

 

How did demand and sales perform across segments?

 

Intakes of new work rose at the slowest pace since January 2025 and growth in sales softened across three of the four broad areas of the service economy – Finance & Insurance, Real Estate & Business Services and Transport, Information & Communication.

 

In contrast, all four categories recorded quicker expansions in new export orders with overall growth in foreign sales nearing a series peak, said the release.

 

What is driving the rise in input cost inflation?

 

Price rise for inputs was the quickest in seven months and was above the long-run series average.

 

“Services firms reportedly transferred part of their additional cost burdens to clients, but they continued to absorb some of it. March saw input prices increase at the fastest pace in close to four years, with the gap between rates of inflation the widest since July 2023,” the release added.

 

Costs for service providers for chicken, cooking oil, eggs, electricity, fish, fruits, fuel, labour, meat and vegetables rose since February. The quickest increases in input costs and output charges were seen in Consumer Services and Finance & Insurance respectively.

 

“As such, service providers’ expectations for future activity remained positive. However, input cost inflation accelerated to its fastest pace since 2022, indicating that higher fuel, transport and logistics costs are feeding into services,” Bhandari added.

 

What does the data show on employment and overall activity?

 

Meanwhile, employment generation expanded for a third consecutive month with the pace of job creation being the strongest since mid-2025.

 

The services sector mirrored the slowdown in the manufacturing sector, which plummeted to a 45-month low in March as new orders and output slumped.

 

The HSBC India Composite PMI Output Index, which is a weighted average of the Manufacturing Output Index and the Services Business Activity Index, also slumped to a 40-month low in March, falling to 57 from 58.9 in February. The Composite PMI reading was the weakest since November 2022 when it was 56.7.