New Delhi: India’s services sector activity fell to a 10-month low in September as new businesses, international sales and output growth moderated, a monthly survey said Friday.
The seasonally adjusted HSBC India Services Business Activity Index fell from 60.9 in August to 57.7 in September, indicating that though the output registered an increase, the pace of growth was the slowest since November 2023.
In the Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.
“India’s services PMI data showed that the services sector expanded at a slower pace in September. The headline Business Activity Index fell below 60 for the first time in 2024, but we note that at 57.7, it was still much above the long-term average,” said Pranjul Bhandari, Chief India Economist at HSBC.
The growth was reportedly curbed by fierce competition, cost pressures and changes in consumer preference (i.e. switch to online services) and softer increase in new export orders.
According to the survey, firms reported the weakest rise in international orders in nine months. The rate of expansion moderated to the weakest in 2024 so far. Still, some firms noted gains from Asia, Europe, North America, the Middle East and the US.
The September data highlighted that there was solid job creation and the weakest uptick in selling prices in over two-and-a-half years. Moreover, business optimism also strengthened.
“Services companies’ margins have likely been squeezed further, as prices charged rose at a slower pace when input cost inflation intensified. A long period of robust new business growth has led to strong labour demand,” Bhandari said.
Meanwhile, HSBC India Composite Output Index fell from 60.7 in August to 58.3 in September as both factory production and services activity rose at slower rates.
Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors according to official GDP data.
Despite the loss of growth momentum, private sector employment rose markedly, and business confidence strengthened since August.
With regards to prices, the latest results showed a quicker increase in aggregate input costs, parallel to a softer uptick in prices charged for the provision of Indian goods and services, the survey said.
PTI