Services sector activity softened in the new fiscal with the Nikkei Services Business Activity Index falling to 53.7 in April due to a solid, although softer, expansion in new business orders. It was at a 37-month high of 54.3 in March.

The survey revealed that new business at services firms rose for the tenth straight month in April but pointed to a lack of pressure on the capacity of service providers, as unfinished business declined.

“The latest fall was the third in as many months, but the weakest in this sequence and fractional overall,” said a Nikkei release on Wednesday.

Similarly, the Nikkei India Composite PMI Output Index dropped to 52.8 in April from 54.3 in March. A reading above 50 represents expansion while one below this level means contraction.

“Manufacturers appear to be still struggling to generate strong upward momentum in a subdued demand environment, while solid increases in activity and new work were sustained among service providers,” said Pollyanna De Lima, economist at Markit, which compiles the survey.

The softer expansion in activity along with the unchanged employment data and a dip in business expectations also indicate that companies are still not convinced about the economic recovery and the strong March numbers was a “one-off”, added De Lima.

“The latest increase in output was supported by growth in the financial intermediation, post and telecommunication and transport and storage sub-sectors,” said the release.

Services employment was unchanged in April, making it the ninth straight month of broadly stagnant employment trends.

The higher prices paid for fuel, average input costs faced by Indian services companies increased in April and the rate of cost inflation reached a 13-month high.

Part of additional cost burdens was passed on to clients, as both manufacturers and service providers raised their selling prices again in April.

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