April 2022: Services Sector Activity at Five-month High

India’s services sector growth continued to gain momentum in April on a surge in incoming new work and supporting a renewed increase in employment even as inflation concerns dampened business confidence. The S&P Global India Services Purchasing Managers’ Index rose to 57.9 in April from 53.6 in March, its highest since November. A reading above 50 indicates expansion and below that shows contraction.

April data pointed to soaring operating expenses at Indian services firms, with survey participants reporting higher chemical, food, fuel, labour, material and retail costs. Having accelerated from March, the overall rate of inflation was sharp and the second-strongest since data collection started in December 2005.

As per the survey report, the rate of charge inflation was marked and the highest in close to five years. Inflation concerns restricted business confidence in April. Although still positive overall, the overall level of sentiment slipped from March.

International demand for Indian services worsened in April, a trend that has been recorded in each month since the onset of Covid. New orders from abroad fell at a marked pace that was the quickest since September 2021. Consumer services and finance and insurance were the top-performing areas, while real estate and business services was the only sub-sector to post contractions in sales and output.

Rahul Bajoria, chief India economist at Barclays, said that the services PMI indicated that services activity has returned to pre-Omicron levels but downside risks to activity remain from rising inflation, but activity is showing resiliency.

No comments: