 "Services activity growth slows, yet remained solid in July: PMI data | Economy & Policy News")
The survey also highlighted that higher wage and material costs continued to push up business expenses, with the overall rate of inflation quickening from June | Representative image
Amid new business gains, online offerings, and investment in technology, growth in India’s dominant services sector remained upbeat in July, albeit slightly slower than in June, according to a private business survey.
The headline Purchasing Managers’ Index (PMI) figure, released by HSBC and compiled by S&P Global on Monday, fell marginally to 60.3 in July from 60.5 in June. However, the index remained above the neutral 50-mark, which separates contraction from expansion, for the 36th consecutive month.
Moreover, cost pressures remained elevated, pushing up selling-price inflation to a seven-year high in July, which also saw stronger job creation.
“Indian service providers experienced a further upturn in business activity during July. Survey respondents mostly cited investment in technology, online offerings, new business gains, and robust demand as the main drivers of growth. The third-fastest expansion in international sales in nearly ten years supported another robust increase in overall new order intakes, which in turn underpinned the hiring of full- and part-time workers,” the survey noted.
The survey also highlighted that higher wage and material costs continued to push up business expenses, with the overall rate of inflation quickening from June.
“Stronger cost pressures and positive demand trends contributed to the steepest rise in prices charged for services in seven years,” the survey said.
Pranjul Bhandari, chief India economist at HSBC, noted that 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 the year ahead,” she added.
On the export front, the survey observed that new export orders increased at the third-strongest pace since the inception of the series in September 2014, amid strengthening demand for Indian services from across the world. Some of the sources of rising export orders mentioned by panellists included Austria, Brazil, China, Japan, Singapore, the Netherlands, and the US.
“Meanwhile, a pick-up in cost pressures and stronger pipelines of new business encouraged panellists to hike their selling prices again in July. The overall rate of charge inflation climbed to a seven-year high,” the survey said.
When explaining cost increases, firms particularly mentioned labour and materials. The latter was attributed to greater outlays on eggs, meat, and vegetables. The overall rate of cost inflation was solid and faster than that seen in June, but remained below its long-run average.
On the employment front, the survey noted that the latest rise in employment levels was among the strongest in close to two years, with job creation achieved via the hiring of full- and part-time staff, according to anecdotal evidence. Favourable economic conditions and optimistic expectations for output supported recruitment among services firms.
“Despite historically strong increases in employment in recent months, and in tandem with buoyant demand, backlog volumes rose further in July. The pace of accumulation was moderate, despite quickening from that seen at the end of the first financial quarter. Looking ahead, services firms remained strongly optimistic about growth prospects,” the survey noted.
First Published: Aug 05 2024 | 11:35 AM IST
