Services PMI jumps to 4-month high of 53.7 in November

The country’s services purchasing managers’ index (PMI) rose to 53.7 in November from 52.2 in October. Manufacturing PMI too rose to 54 in November from 53.1 in October.

Services PMI is prepared on the basis of a survey conducted among purchasing managers of over 400 private companies. These companies belong to five sectors namely consumer services, transport & storage, information & communication, financial & insurance and real estate & business services. Index over 50 shows expansion and below 50 indicates contraction. The index and subsequent report are prepared by IHS Markit.

According to the report, buoyed by a firm underlying demand, Indian service providers raised the business activity at the sharpest rate in four months midway through the quarter. November saw the joint-strongest upturn in new work since last two years and another round of job creation. Firms became more upbeat towards growth prospects, after the sentiment had dipped to a 20-month low in October.

On the price front, softer rise in expenses was registered, while a more favourable demand environment enabled a strong uptick in charges. Services jobs rose in November, stretching the current sequence of expansion to 15 months.

Pollyanna De Lima, Principal Economist at IHS Markit, said that growth in India’s dominant service sector leapt to a four-month high in November, thanks to solid increase in new work, which in turn led to a continued rise in job numbers. The welcoming news complement similar upbeat results in the manufacturing industry, released earlier in the week, and so far suggest that the private sector economy will provide impetus to Q3 FY18 GDP results.

“Keeping up with the levels of new work and increased activity, additions to the workforce were maintained for the 16th month running. So far, 2018 proved to be the strongest year for employment growth for a decade,” she said.

With manufacturing on the rise, the composite (manufacturing+services) PMI output index jumped to 54.5 in November from 53 in October. This is the fastest expansion in private sector activity since October 2016. Growth was stronger in manufacturing than in services, though increases at a rapid pace were noted across both sectors.

The report said that November saw India’s economy spring back to life, as manufacturers and service providers registered stronger increase in business activity amid an upsurge in demand. Inflow of new work expanded at a pace not seen for over two years, supporting further job creation and an uptick in confidence. As far as price front was concerned, input cost inflation moderated to a seven-month low, but a firm demand enabled firms to hike their charges to a greater extent.

“Of respite to firms, there was a cooling of cost inflationary pressures midway through the third quarter. This, coupled with a firm demand, enabled manufacturing and services companies to seek to improve their margins by hiking charges at quicker rates,” Lima mentioned.

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