Services PMI Rises To 62.3 In July On Strong Demand, Highest In Over 13 Years

The purchasing managers' index (PMI) for services grew to its highest level since June 2010 to 62.3 in July

The rise in services PMI in July was attributed to demand strength and new business gains, according to S&P Global data. ( Image Source :Getty )

Services activity in India jumped sharply to 62.3 in July to its highest pace in over thirteen years, according to a private survey. According to data released by S&P Global on Thursday, the last time it was higher was in June 2010. It has also stayed above the key level of 50 that separates expansion in activity from a contraction for 24 months in a row.

The purchasing managers' index (PMI) for services grew to its highest level since June 2010 to 62.3 in July. The rise in PMI was attributed to "demand strength and new business gains". In a statement, S&P said, "Service providers noted the second fastest increase in new export orders since the series started in September 2014."

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said, "The resilience of the service sector underscores its vital role in fuelling India's economy, with the PMI results for July so far pointing to a notable contribution from the sector to overall GDP for the second fiscal quarter."

According to survey members, the upturn was largely attributed to demand strength and new business gains.

"The broad increases in sales across the domestic and international markets are particularly welcoming news, especially in light of the challenging global economic scenario. Firms noted a widespread upturn in services exports to several nations including Bangladesh, Nepal, Sri Lanka and the UAE," Lima said.

On the inflation front, cost pressures intensified and monitored companies signalled greater food, labour and transportation costs. Despite the rise in cost pressures, charges were raised to a weaker extent as firms were cautious about their pricing strategies. "Looking at PMI price indices in recent months, it seems that competitive advantage continued to support demand for Indian services, with increases in output prices here modest relative to several other nations," Lima said.

Although input cost inflation ticked higher in July, service providers were again cautious in their price-setting decisions amid efforts to not deter sales, Lima added.

The PMI is a survey-based indicator based on the responses of around 400 service firms. The sectors it covers includes non-retail consumer services, transport, information, communication, finance, insurance, real estate, and business services. An index is calculated for each sector, all of which are then combined to give an overall PMI figure.