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The Purchasing Managers’ Index (PMI) for services dripped a tad to 58.1 in November from 58.4 in October, yet it expanded at the second fastest pace in over a decade.
Economic research firm IHS Markit, which conducts the survey , indicated that India’s service sector continued to strengthen, underpinned by a substantial upturn in new orders.
Inflation worries
“Although companies forecast higher business activity volumes over the course of the coming year, the expansion is expected to be restricted by price pressures. According to monitored companies, the upturn reflected sustained increases in new work and ongoing improvements in market conditions,” it said.
Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said the service sector’s recovery extended into November, with a robust improvement in sales translating to the second fastest rise in business activity in nearly ten-and-a-half years. Companies were somewhat convinced that the output level would continue to rise in the year ahead, but worries on inflation weighed on the confidence levels, again.
Further, De Lima said services firms saw their expenses rise the steepest in a decade in November. Some of the additional cost burden was passed onto customers by way price hikes. The rate of charge inflation eased from October, however, and was only moderate.
“Looking at the manufacturing and service sectors combined, the results are encouraging and bode well for economic performance in the third quarter of 2021-22. With production growth quickening considerably in November, private sector output expanded at its fastest pace since January 2012,” she said.
PMI data
Manufacturing PMI, too, had risen in November. Both the PMI data are released every month by IHS Markit, ahead of comparable official economic data. Services has a share of 57 per cent in the Gross Value Added (GVA), while for manufacturing, it is over 14 per cent.
Both PMIs are prepared by compiling responses from questionnaires sent to a panel of around 400 companies each from manufacturing and services sector. A diffusion index is calculated for each survey variable. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.
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