Softening in demand slows services sector in September, PMI falls to 60.9

Operating conditions across India's service economy remained favourable in September, with healthy demand trends underpinning further growth of total new orders, exports, employment, business activity

Growth in India’s dominant services sector lost momentum in September, as demand softened along with exports and business activity, showed a private survey released on Monday.

 

The headline HSBC purchasing managers index (PMI) figure, compiled by S&P Global, fell to 60.9 in September from a 15-year high of 62.9 in August. However, this marks the fourth straight month the index has held above 60, underscoring resilient demand in the world’s fastest-growing major economy.

 

“Operating conditions across India's service economy remained favourable in September, with healthy demand trends underpinning further growth of total new orders, exports, employment and business activity. In all four cases, however, rates of expansion eased since August,” the survey noted.

 

 

Encouragingly, a softer increase in expenses helped curtail charge inflation. Moreover, confidence towards the year ahead outlook for output strengthened.

 

The index has now been above the neutral 50 mark, which separates contraction from expansion, for 50 months straight.

 

Pranjul Bhandari, chief India economist, HSBC, said that business activity in India’s services sector eased in September from the recent-high August level, as most trackers moderated, but nothing in the survey suggested there is a big loss in growth momentum in services.

 

“Instead, the future activity index rose to its highest level since March, indicating strengthening optimism among services companies about business prospects,” she added.

 

The survey noted that demand buoyancy and new business gains, alongside tech investment and favourable public policies, supported the rise in output, with competitive conditions and cost-control measures acting as the barriers to growth.

 

“Similarly, new order intakes rose at a sharp pace that was nevertheless softer than that registered in August. Underlying data showed that part of the slowdown reflected softer improvements in international demand for Indian services,” the survey noted.

 

The external sales still rose in September, but did so to the least extent since March. Companies identified the supply of services at lower prices elsewhere as the main factor behind the slowdown in growth of export orders.

 

Indian services companies reported a further increase in their expenses at the end of the second quarter. According to them, outlays on labour and materials rose since August. The overall rate of inflation was solid, but eased since the previous month and was below its long-run average.

 

On the employment front, the survey noted that job creation slowed during September. Employment rose at a modest pace, as fewer than 5 per cent of monitored companies reported hiring growth.