India’s service economy remained firmly inside expansion territory, but the PMI results for June showed a loss of momentum as challenging market conditions and reduced client interest for some services reportedly stymied growth in total sales and output, a private survey showed on Friday.
Accordingly, India’s services sector grew at a weaker pace during June, with output moderating as new order growth slowed to its weakest pace in more than two-and-a-half years, the survey said.
The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 57.4 in June from 59.8 in May, indicating the weakest rate of expansion in 17 months. However, the reading remained above both its long-run average of 54.4 and the neutral 50.0 mark.
The survey said the slowdown in sales and output also impacted employment, with hiring activity remaining broadly stagnant while business confidence weakened.
Export cushion
Despite the slowdown in growth during June, new export orders rose at the fastest pace in three months, while easing cost pressures curbed charge .
According to survey participants, demand from clients in Australia, Belgium, Canada, Germany, Malaysia, Nepal, Oman, Qatar, Singapore, the UAE and the US improved.
Indian services firms continue to foresee output growth over the next 12 months, but the overall level of positive sentiment slipped to a five-month low and remained below the historical trend, the survey noted.
Some companies expect to benefit from equipment acquisition, marketing efforts and new client enquiries. Others cited competition, challenging economic conditions and as potential headwinds, according to the survey.
“The loss of momentum (of services sector in June) points to more challenging market conditions and weaker demand, particularly at home. Even so, external demand held up well as overseas sales stayed robust and growth reached a three-month high. Price pressures also continued to cool, with both input cost and output charge inflation moderating as geopolitical disruptions in the Middle East began to subside,” Pranjul Bhandari, chief India economist at HSBC, said.
Hiring stalls
The survey said that, as was the case in the previous month, outstanding business volumes were broadly stable in June, with the respective seasonally adjusted index only fractionally above the 50.0 threshold.
However, input costs continued to rise at the end of the first fiscal quarter, with survey participants citing , food, fuel and transportation prices. The rate of inflation remained moderate by historical standards and eased to a five-month low, the survey said.
Consumer services topped the inflation rankings for both input costs and output charges, despite recording weaker rates of increase than in May, it added.
The seasonally adjusted HSBC India Services PMI Business Activity Index is based on a single question asking how the level of business activity compares with the previous month.
Broader slowdown
Reflecting the broader slowdown, the HSBC India Composite PMI Output Index also fell to 57.1 in June from 59.3 in May, alongside softer sales volumes, slower job creation and more subdued pricing.
Business activity, and new orders across India’s private sector rose at weaker rates in June, with softer expansions recorded in both the manufacturing and services sectors.
In parallel with the slowdown in , private sector companies restricted the extent to which they raised selling prices as cost pressures eased. Rates of input price and output charge inflation retreated to five- and seven-month lows, respectively, the survey said.
Finally, manufacturers and service providers downgraded their output forecasts in June. At the composite level, the overall level of positive sentiment fell to a five-month low, it added.