India’s services sector activity dropped to a six-month low in October although business confidence strengthened during the month. HSBC’s Purchasing Managers’ Index for services dropped to 50 in October from 51.6 in the month before.
A reading above 50 on this survey-based index indicates expansion while below that underlines contraction.
The services PMI, compiled by financial information services company Markit, is based on a survey of purchasing executives in about 350 private service sector companies.The sector, which accounts for over 55% of India’s GDP, has been facing a downturn for over a year, with segments such as banking and real estate facing demand and investment constraints due to high interest rates.
Official data released by the Central Statistics Office showed that the services sector expanded 6.8% in the first quarter of 2014-15 against 7.2% in the year-ago period.
Employment growth in the domestic services sector also slowed in October. The rate of job creation was marginal overall and weaker than the long-run series average, said the report.The slump in India’s manufacturing has impacted services activity.The PMI for manufacturing showed a modest pickup in October due to stronger output and new order flows.
Nonetheless, the survey suggested that service sector firms in India remained highly optimistic regarding prospects for activity growth in the coming year.
Backlogs of work at service sector firms in India accumulated at the quickest pace in three months during October.Input price pressures faced by Indian services companies rose in October, in contrast to the cooling prices for manufacturers.Wholesale inflation fell further to a five-year low of 2.38% in September while retail inflation, the key inflation measure watched by the Reserve Bank of India, eased to a series low of 6.46% during the month.
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