India Services Business Activity Index touched 60.3 in the month. The survey, compiled by S&P Global, recorded a Services PMI of 60.5 earlier in June.
This reading was over six points higher than the long-run average of the index and reflected a growth in the business activity in the sector. The sector’s output growth indicated a consistent rise in sales volumes in July, as the expansion in global sales soared at the third-fastest rate seen in almost a decade.
Growth And Outlook
This growth was attributed to the investment in technology, online offerings, new business gains, and improved demand. Further, the surge in sales led to new order intakes and an increase in hiring for full and part-time positions in the workforce.
The month witnessed a quickening in the overall inflation rate as rising wages and material prices contributed to an elevation in business expenses. “Stronger cost pressures and positive demand trends contributed to the steepest rise in prices charged for the provision of services for seven years,” the survey noted.
Regarding the outlook for the sector, the survey stated that the companies in the industry remain optimistic about their growth prospects. About 30 per cent of the survey respondents predicted higher output volumes in the next 12 months, while only 2 per cent forecasted a decline in the segment.
The index is seasonally adjusted and is put together from responses to questionnaires shared with a panel of nearly 400 service sector firms. The Services Business Activity Index can be interpreted as the Services PMI for the economy, the survey stated.
Composite Output Index
The HSBC India Composite Output Index inched lower to 60.7 in July, against the reading of 60.9 recorded in June. This indicated a continuation of the growth momentum seen recently. This upturn was driven by the manufacturing industry, where overall new work increased at a sharp pace, surpassing the long-run average figures.
However, charged inflation also soared to hit almost an eleven and a half year peak in the month under review, as input cost inflation also rose in the month.
The Composite index is a weighted average of the Manufacturing Output Index and the Services Business Activity Index. This index can be seen as the Composite PMI, but can't be compared with the headline manufacturing PMI data.
Commenting on the survey findings, Pranjul Bhandari, Chief India Economist, HSBC, noted, "India’s composite PMI recorded another month of robust expansion in July, albeit at a slightly slower pace than in June. Robust demand conditions, reflected by increased new orders from both domestic and international markets, led firms to increase hiring levels. On the price front, higher wages and material costs led to a further increase in input costs. Consequently, output prices rose at the fastest pace in over 11 years. Service sector activity rose at a slightly slower pace in July, with new business increasing further, primarily driven by domestic demand. Looking ahead, services
firms remained optimistic about the outlook for year ahead.”