Contrary to manufacturing, the services sector pressed the accelerator in February as Purchasing Managers’ Index (PMI) jumped to 59.4 in the said month as against 57.2 in January. It is 12 years high. However, there was no meaningful impact on job creation.

The services sector has a maximum share of 53 per cent in Gross Value Added (GVA). On Wednesday, PMI manufacturing dropped a tad to 55.3 in February from 55.4 in January. Services and manufacturing, together, have a share of around 70 per cent in GVA.

PMIs are prepared by S&P Global and are released in advance of government data and treated as high-frequency indicators to evaluate economic activities.

Regained lost momentum

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said the services sector more than regained the growth momentum lost in January, posting the sharpest expansion in output for 12 years as demand resilience and competitive pricing policies underpinned the joint best upturn in sales over the same period.

Also read
Workers at a MSME supplier unit for a automobile manufacturer in Hosur.

PMI Manufacturing almost flat at 55.3 in February, job situation remains stagnant

Despite the strong upturn in new business intakes, service providers noted only mild pressure on their capacities, and as a result, a large proportion of firms left payroll numbers unchanged. “It seems that hiring growth was also dampened by a lack of confidence in the business environment. The degree of optimism recorded in February was the lowest for seven months and below the historical trend as some companies doubted demand would remain this resilient. Others displayed concerns surrounding fierce competition for new work,” she said.

The latest PMI data appears to be presenting a similar trend like data released by National Statistical Office (NSO) on Tuesday showed. These data revealed that growth in the services sector came down from 16.3 per cent in the April-June quarter (Q1) to 9.4 per cent in the July-September quarter (Q2) and further to 6.2 per cent in the October-December quarter (Q3). Now from the estimated annual growth rate of 9.5 per cent in FY23, the imputed growth rate for the January-March quarter (Q4) is 6.5 per cent, showing a rise from Q3.

Consumer services

Meanwhile, the PMI report highlighted that consumer services was the best-performing area in February, registering the fastest increase in new orders and business activity. Although Indian service providers signalled a further increase in their expenses midway through the final fiscal quarter, the rate of input price inflation moderated to a 29-month low. Companies commonly cited higher food, material, transportation and wage costs.

Only 4 per cent of services companies transferred cost increases to their clients, while the majority opted to leave selling prices unchanged. Subsequently, the overall rate of charge inflation eased to a 12-month low.

Related Topics
comment COMMENT NOW