India's Service Sector Expands But PMI Falls To 60.1 In August

The S&P index revealed that the latest growth is a result of positive consumer sentiment, favourable market conditions, and successful events.

India’s services sector’s purchasing managers’ index (PMI) fell to 60.1 in August, down from 62.3 in July, according to the data released by S&P Global on Tuesday. However, the seasonally adjusted services PMI index displayed a record-strong increase in output, not seen for more than a decade. 

The S&P index noted that the latest growth is a result of positive consumer sentiment, ‘favourable market conditions, and successful events’. The services PMI further revealed that total new business was on the upward trend for the twenty-fifth consecutive month during August. The service sector growth was attributed to strong demand for advertising and services. Despite the decline from July, the total growth in sales was one of the strongest since mid-2010. 

“Indian services firms managed to secure a healthy number of new business despite hiking their charges again. August saw the overall rate of output price inflation quicken to the joint strongest in over six years. The overall rate of input price inflation remained above that seen for output charges, despite easing since July. The rate of increase was the second-fastest in over a year and above its long-run average. Monitored companies suggested that food, input, and labour costs all rose over the course of August,” the release noted. 

Hiring activity across the Indian service sectors remained on the positive end in the current fiscal year. The survey respondents reported a mix of permanent and temporary hirings on both part-time and full-time basis. Although the speed of job creation was moderate, the survey noted that it was the strongest since last November. 

Further, manufacturers overtook the services sector and emerged as the best performers. As such, the S&P Global India Composite PMI Output Index fell from 61.9 in July to 60.9 in August. “New orders placed with private sector companies rose further, taking the current stretch of growth to just over two years. The pace of expansion eased since July, but was sharp and one of the best seen since mid-2010,” the release added. A swift growth was seen in the manufacturing sector compared to a slowdown in the services sector. Composite PMIs are a combination of manufacturing and services PMIs. 

Notably, the S&P Global India Services PMI is a survey including responses from over 400 service sector companies. The survey covers companies across sectors, such as consumer (excluding retail), transport, information, communication, finance, insurance, real estate, and business services. The PMI is derived after compiling the indexes calculated for each sector. Given the monthly nature of the PMI and it’s seasonal adjustments, it is considered a reliable indicator of economic activity.