India’s services sector in June appears to have slowed down further, according to the Purchasing Manager Index (PMI). The Nikkei India Services PMI (erstwhile HSBC India Services PMI) was at 47.4 in June, down from 49.6 in May.

The index is at its lowest since March 2014 and has also posted a sub-50 reading for the second consecutive month.

Pollyanna De Lima, Economist at Markit (the agency which compiles the survey), said that June’s data disappointed with reductions in both activity and new business accelerating since May.

“The heat wave and competitive pressures were again reported to have weighed on service providers’ performance. However, companies are hopeful of turning the corner in the coming months, with confidence regarding the 12-month outlook remaining strong,” she said. Services contribute over 57 per cent of the gross domestic product (GDP). This index is calculated on the basis of response from Purchasing Manager Executives of 350 private sector companies across six services sector. An index above 50 means expansion and below 50 means contraction.

The survey also shows that confidence among Indian service providers remained strong in June, with panellists expecting activity to increase over the next 12 months. However, the degree of positive sentiment expressed was the lowest in three months and weak by historical standards.

Those panellists anticipating growth in activity cited new projects, improved marketing strategies and hopes of better economic conditions, according to the survey. Manufacturing too saw a decline in June and PMI for manufacturing fell to 51.3 in June from 52.6 in May.

Analysing the trend in manufacturing, De Lima said that growth in manufacturing production was insufficient to offset the decline in services output and private sector activity fell for the first time since April 2014 during June. All these resulted in the Composite Output Index falling from an average reading of 53.3 in January-March to 51.0 in the three months to June, suggesting that GDP growth weakened in the April quarter, she said.

“On the positive side, inflation rates softened in June. Weaker rises in input costs and output charges were seen across both the manufacturing and services sectors. All in all, latest data suggest that the RBI’s commitment to support economic growth may result in further rate cuts at its August meeting, probably the last in 2015,” she said.

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