India’s services sector activity expands at fastest pace in 10.5 years in Oct: PMI

India’s services sector

Services sector activity expanded at the strongest pace in
ten-and-a-half years in October, driven by a substantial upturn in
business activity amid favourable demand conditions, a monthly survey
said on Wednesday.

Companies indicated that a notable pick-up in new business led to the
fastest expansion in output in over a decade and as a result more jobs
were created, even though business confidence remained subdued due to
growing inflationary concerns.

The seasonally adjusted India Services Business Activity Index rose from
55.2 in September to 58.4 in October, signalling the strongest rate of
growth in ten-and-a-half years.

For the third straight month, the services sector witnessed an expansion
in output. In Purchasing Managers’ Index (PMI) parlance, a print above
50 means expansion, while a score below 50 denotes contraction.

“… The recovery of the sector entered its third straight month, with
firms scaling up activity at the fastest pace in ten-and-a-half years
and creating more jobs,” said Pollyanna De Lima, Economics Associate
Director at IHS Markit.

On the price front, with input costs again rising sharply, companies
lifted their fees at the fastest pace in nearly four-and-a-half years.
Monitored companies cited higher fuel, material, retail, staff and
transport costs.

“… Service providers were concerned that persistent inflationary
pressures could deter growth in the coming year. Business confidence
remained subdued in the context of historical data,” Lima said.

On the employment front, services companies continued to hire additional
workers in October. Although moderate, the pace of job creation
quickened from September to the strongest since February 2020.

However, the latest data continued to point to weak international demand
for Indian services. New export business decreased in October, a trend
that has been recorded since the COVID-19 outbreak, the survey said.

Meanwhile, private sector output in India increased at a sharper rate in
October as growth quickened among both manufacturers and service providers.

The Composite PMI Output Index — which measures combined services and
manufacturing output — rose from 55.3 in September to 58.7 in October,
signalling the strongest monthly expansion since January 2012.

October data pointed to a second successive monthly increase in private
sector employment, but the rate of expansion was only slight as growth
among service providers was partly offset by job shedding at goods
producers.

Business sentiment among companies operating in the Indian private
sector strengthened in October, owing to a notable rebound in optimism
at goods producers, the survey said.