Services Activity Bounces Back in July

India’s services sector activity rose to a 12-month high in July, boosted by fast output growth and strong domestic and international demand, pushing job creation to an eight-and-a-half year high.

The IHS Markit India Services Purchasing Managers’ Index climbed to 53.8 last month from 49.6 in June, rising above the 50 mark that separates contraction from growth.

As per the survey report, job creation picked up the strongest since early 2011 in response to strengthening demand conditions and upbeat predictions for the economic outlook.

New export orders rose for the fifth consecutive month in July, growing at the fastest pace since the survey began measuring export growth in September 2014.

The real estate and business services category was the only sector that did not witness output growth in July, according to the report.

The PMI services activity index is based on a survey of purchasing executives of more than 400 service providers in five categories: consumer services, transport & storage, information & communication, financial & insurance and real estate & business services

Private sector output in India rose to the highest level in eight months in July with the Composite PMI Output Index recording 53.9 from 50.8 in June. Job creation across both the manufacturing and services sectors rose to a five-month high in July, according to the report.

Greater employment in the manufacturing and service sectors should support household spending and consumer confidence in the short term, De Lima added.

As per the survey report, though input price inflation at the composite level accelerated to a five-month high, the overall rate of inflation remained modest, suggesting inflation is likely to remain below the Reserve Bank of India’s medium-term target of 4% in the coming months, underscoring expectations for another interest rate cut by the central bank when it meets on August 7.

Job creation across both the manufacturing and services sectors rose to a five-month high in July

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