Services sector PMI slips second month in a row

Our Bureau Updated - December 07, 2021 at 02:33 AM.

Loss in momentum in April driven by ‘hotel & restaurants’

BL07_PMI_Services.eps

After manufacturing, the services sector also slowed down in April. The HSBC Purchasing Managers’ Index (PMI) dropped to 52.4 in April, against 53 in March, which means that growth in activity and new orders softened for the second consecutive month. The sector contributes over 57 per cent to the gross domestic product.

Economists believe that the slowdown in both manufacturing and services is a grim reminder that growth recovery is yet to find a firm footing. However, there are expectations that weak growth and low inflation will give the Reserve Bank of India headroom to cut policy rates in its upcoming meeting in June.

Commenting on the services data, Pollyanna De Lima, economist at Markit (the agency which compiled data), said slowdown in the Indian services sector continued in April with weaker activity reflecting softer demand conditions. Accompanying the subdued outlook in the opening month of the new fiscal was a return to job-shedding as companies maintained a cost-cautious approach.

Scope for rate cuts

She said panellists expressed confidence as the one-year outlook for activity improved, indicating that firms are optimistic and the current growth deceleration a temporary soft patch. “Inflation rates for both input and output prices were weak by historical standards, providing the RBI with more scope for further rate cuts. An expansionary approach to monetary policy would, at a time when the economy is losing traction, provide much needed support for further growth,” she added.

Calculation method

The PMI is prepared on the basis of response received from 350 purchasing managers of private companies in sectors such as hotels & restaurants, transport & storage, financial intermediation, renting & business activities, post & telecommunication, and others. An index above 50 reflects expansion, while below 50 means contraction.

Posts and telecom

The survey indicated that the loss in momentum was driven by ‘hotel & restaurants’, while the quickest expansion was seen in ‘post & telecommunication’. Despite some moderation in April, growth momentum in services continued to be stronger than manufacturing. Since both of the sectors registered a slowdown in April, the composite output index also came down.

The composite output index dipped to 52.5 in April from 53.2 in March, which is a six-month low. The grim picture on the manufacturing and services front also affected the stock market on a day when it faced a severe bear attack, plunging the benchmark BSE Sensex and NSE Nifty to 26,717 and 8,097 , respectively.

Published on May 6, 2015 05:39