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Services sector hit a five-month low witnessing the slowest rise since July in incoming new work as Indian services companies saw demand growth lose strength during November, as per HSBC PMI index.
Down from October’s eight-month high of 53.2 to 50.1 in November, the seasonally adjusted Nikkei Business Activity Index – which is based on a single question asking respondents to report on the actual change in output at their companies compared with one month ago – pointed to broadly unchanged levels of services activity across India, the report said.
Biz activity
As a consequence, business activity broadly stagnated and confidence waned. The gloomy trend was also observed in the labour market, as employment rose at a pace that was historically muted. Meanwhile, companies reported no change in selling prices, despite a further increase in costs, it said.
Sub-sector data indicated that output growth in the Financial Intermediation, Post & Telecommunication, Renting & Business Activities and ‘Other Services’ categories was offset by declines at Transport & Storage and Hotels & Restaurants firms. In fact, the latter recorded a sharper rate of reduction.
New business
Service providers in India reported a further increase in new business during November, the fifth in as many months. However, the rate of expansion was only slight and well below the average for the series. Survey members blamed fierce competition and frail economic conditions for the slowdown in growth of new work.
Amid evidence of outstanding payments from clients, unfinished business rose during November. That said, the rate of backlog accumulation was only modest. Meanwhile, growth of service sector employment was only slight and below the ten-year survey average.
According to the report, input costs increased for the second straight month in November, with panellists reporting higher prices paid for food and petrol. The rate of inflation was only slight, despite accelerating to the fastest since July.
Regardless of the rise in cost burdens, services companies kept selling prices on hold in November. Around 97% of survey members indicated no change in their tariffs, citing limited pricing power amid weak demand conditions.
Services companies in India displayed a lack of optimism with regard to the 12-month outlook for activity, as sentiment dropped to the lowest in the ten-year survey history. Difficult economic conditions and weak demand reportedly hit confidence.
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