January 2020: Services PMI at 7-Year High of 55.5

India’s service sector output growth hit a seven-year high in January on the back of strong domestic demand.

The IHS Markit India Services Purchasing Managers’ Index rose to 55.5 in January from 53.3 of the previous month, signalling the strongest upturn in output in seven years. The upswing resulted from favourable market conditions and better underlying demand, survey participants said. A reading above 50 on the index means expansion.

However, the growth in demand was accompanied by inflationary pressures on input costs, which reached a high last seen in February 2013. The steepest increase in this figure came from the consumer services sector.

The Composite PMI Output Index, which maps both the manufacturing and services sectors, increased from 53.7 in December to a seven-year high of 56.3 in January.

Most of the demand came from the domestic market, with a fall in exports ending a 10-month expansion, mainly due to lower demand from China, Europe and the US, survey panelists said.

The Indian economy is forecast to grow by 5% in FY20, its slowest pace in 11 years. The Economic Survey tabled in Parliament last Friday said the economy could grow by 6-6.5% in FY21.

However, cost inflation continued to be a dampener amid reports of higher prices for beauty products, food, freight, fuel and maintenance, the survey said.

Consequently, a number of services companies lifted their selling prices in January. The rate of charge inflation picked up to the fastest since February 2018.

No comments: