-For the 21st straight month, the headline figure was above the neutral 50 threshold
-Finance and insurance record strongest increase in output, says S&P Global’s PMI survey
New Delhi, NFAPost: India’s services sector growth accelerated in April, as strong demand conditions resulted in the fastest increase in new business and output in close to 13 years, a monthly survey said.
The pick-up in demand occurred in spite of escalating price pressures. The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from 57.8 in March to 62.0 in April, signalling the fastest expansion in output since mid 2010, amid a pick-up in new business growth and favourable market conditions.
For the 21st straight month, the headline figure was above the neutral 50 threshold. In Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.
“India’s service sector posted a remarkable performance in April, with demand strength backing the strongest increases in new business and output in just under 13 years. Finance & Insurance was the brightest spot, topping the sectoral growth rankings for both measures,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
Monitored companies signalled an improvement in international demand for Indian services in April. New export business expanded for the third month in succession and at the fastest pace over this period.
On the prices front, input costs rose at the quickest pace in three months during April. According to survey members, food, fuel, medicine, transportation and wages were the main sources of inflation. Consumer services recorded the fastest upturn in average expenses.
The combination of rising input costs and demand resilience urged services companies to lift their selling prices in April. The rate of charge inflation was marked and the strongest in 2023 so far.
On the jobs front, despite the substantial uptick in new orders, staff levels in the service sector increased only marginally at the start of the first fiscal quarter. Whereas some companies lifted headcounts due to rising output needs, the vast majority left them unchanged amid sufficient workers for current requirements.
“One area of weakness highlighted in the latest results was the labour market. Despite the substantial pick-up in sales growth and improved business sentiment towards the outlook, the increase in employment seen in April was negligible and failed to gain meaningful traction,” Lima said.
Going ahead, marketing efforts, plans to price competitively and an increased focus on customer relations boosted business confidence in April.
“Close to 22 per cent of companies forecast growth of business activity over the course of the coming 12 months, compared with 2 per cent that anticipate a reduction,” the survey said.
Meanwhile, the S&P Global India Composite PMI Output Index — which measures combined services and manufacturing output — rose from 58.4 in March to 61.6 in April, its highest mark since July 2010.
Despite the substantial upturn in sales, job creation across the private sector remained mild. Rates of expansion were broadly similar at manufacturing firms and their services counterparts.
At the composite level, input costs rose at the fastest pace since January and charge inflation reached a four-month high.
The S&P Global India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. Data collection began in December 2005.
April services activity hits near 13-year high as inflation accelerates
Growth in India’s dominant services sector quickened in April as demand helped the fastest increases in new business and output in nearly 13 years, said a private survey on Wednesday.
The headline figure in the Purchasing Managers’ Index (PMI) survey by credit rating agency S&P Global rose to its highest level of 62 in April, since June 2010. It was 57.8 in March.
A print above 50 in the survey denotes expansion of services activity and below that suggests contraction. The headline figure has been in the expansion zone for 22 months straight since August 2021.
“Anecdotal evidence linked the upturn to a pick-up in new business growth and favourable market conditions. Out of the four monitored sub-sectors, the strongest increase in output was seen in Finance & Insurance,” said the survey.
The companies the survey monitors reported an improvement in international demand for Indian services in April, signaled by new export business expanding for the third month running and at the fastest pace over this period.
Demand grew despite input costs rising at the quickest pace in three months during April. The survey said food, fuel, medicine, transportation and wages were the main sources of inflation with consumer services recording the fastest upturn in average expenses.
“The combination of rising input costs and demand resilience urged services companies to lift their selling prices in April. The rate of charge inflation was marked and the strongest in 2023 so far. Granular data showed the most acute increase in selling prices among Transport, Information & Communication firms,” it said.
Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said that the performance of India’s service sector was remarkable in April, as demand strength backed the strongest increases in new business and output in just under 13 years.
“Having retreated in each month since the start of the current calendar year, input price inflation quickened in April. PMI survey participants indicated higher salaries and wages awarded to staff, as well as pressures from food, fuel and transportation costs. Accommodative demand conditions facilitated the pass-through of additional expenses to clients, with prices charged for the provision of services increasing at the strongest rate in 2023 so far,” said De Lima.
New orders improved but staff levels in the service sector increased only marginally at the start of the first fiscal quarter as some companies lifted headcounts due to rising output needs, the vast majority left them unchanged amid sufficient workers for current requirements, the survey said.
“One area of weakness highlighted in the latest results was the labour market. Despite the substantial pick-up in sales growth and improved business sentiment towards the outlook, the increase in employment seen in April was negligible and failed to gain meaningful traction,” said De Lima.
Most service providers are optimistic that output would expand in 12 months, after marketing, competitive pricing and focus on customer relations boosted business confidence in April.