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Led by improved demand and new business orders, the services sector appears to have rebounded in December. The Nikkei Services Business Activity Index rose to a ten-month high of 53.6 in the month as against 50.1 in November.
“It was indicative of a solid expansion in output across the sector,” said a statement on Wednesday, adding that four of the six sub-sectors also indicated a rise in output, except hotels and restaurants and transport and storage.
“The best performing categories in December were ‘other services’ and financial intermediation,” it said.
A reading above 50 indicates expansion and a score of less than 50, contraction. One of the key factors behind the jump was a “solid rise” in incoming new work and anecdotal evidence suggest strengthening demand conditions in December.
Sentiment improves Service providers’ sentiment also improved last month but the degree of confidence was the second-weakest in the series’ history, it said.
Meanwhile, the seasonally adjusted Nikkei India Composite PMI Output Index, which monitors both manufacturing and services output, rose to 51.6 in December from a five-month low of 50.2 in November.
“A stronger rise in new business and an improvement in year-ahead expectations at service providers are positive developments, but the overall health of the economy remains fragile amid a weak manufacturing sector,” said Pollyanna De Lima, economist at Markit, which compiles the survey.
De Lima further noted that the overall PMI data portray a struggling economy, weighed down by weak underlying demand.
Official data on industrial performance in November and retail inflation in December will be released on January 12, providing a firmer indication of macroeconomic trends. However, the survey noted that across the private sector, new business inflows expanded at a faster but modest pace in December though most companies operated below capacity, as unfinished work decreased.
Services companies also left payroll numbers unchanged and their input prices, on an average, rose due to higher salaries and cost of food and transport in December. This also resulted in services companies increasing their retail prices last month — the first such hike since August.
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