Services PMI slips

Activity in India's services sector moderated in December in contrast to the robust growth in the manufacturing sector in the same month.The HSBC India Services PMI eased to 51.1 from 52.6 in November, marking a second straight month of expansion after seeing stagnation in October. A reading above 50 signals expansion. The sector, which accounts for close to 55% of income generated in India, saw subdued new orders in December, the survey showed.
Among the six monitored subsectors, financial intermediation saw the sharpest contraction, said the report based on a survey of 350 private sector firms.
The average PMI in the quarter to December stood at 51.2 points, slightly lower than 51.4 in the previous quarter. According to official data, the quarter to September saw a slight improvement in the services sector, which grew at 6.8% compared with 6.1% in the year-ago period. The overall GDP growth during the quarter was 5.3%, slower than 5.7% in the previous three-months.
The subdued services activity in December was largely on account of weaker expansion in new business. The headline HSBC Composite Output Index, which takes both services and manufacturing into account, eased to 52.9 points from 53.6 in November, despite the manufacturing output expanding at a two year high in December.
The index for manufacturing rose to a two-year high of 54.5 points in December, backed by faster expansions in output, new business and foreign orders. The effect of manufacturing shows up in services sector with a lag.
Despite slowdown in activity and new orders, business confidence among service providers improved.
Inflationary pressures from both input and output prices remained modest. The RBI has maintained status quo on interest rates for close to a year now, refraining from a rate cut despite moderating inflation.

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