May 2022: Services Activity Rises to 11-year High

Activity in India’s services sector rose to an 11-year high in May as new business picked up and demand recovered following the reopening of the economy after Covid-19 lockdowns, even as input prices recorded an unprecedented rise.

The S&P Global Purchasing Managers’ Index for services rose to the highest level since April 2011 to 58.9 in May from 57.9 in April with consumer services recording the sharpest increase in new orders.

May data recorded a 23rd successive month of rising input prices at Indian service providers. The rate of inflation climbed to the highest in 16-and-a-half years of data collection, according to the report.

Intensified inflationary pressures impacted business optimism and services companies continued to pass on increased cost pressures and spike in input prices to consumers by hiking prices. Businesses were concerned that inflationary pressures would dampen the economic recovery. Service providers reported soaring operating expenses, having to bear higher costs for food, fuel, labour, material, retail and transportation.

A sister survey showed that India’s manufacturing sector growth steadied in May at 54.6. Taken along with services, the S&P Global Composite PMI Output Index rose to 58.3 in May from 57.6 in April —the fastest since November last year.

According to the survey, business confidence among private sector firms remained subdued in May, despite improving from April. Manufacturers and service providers were concerned that inflationary pressures would restrict output growth over the course of the coming 12 months.

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