April 2019: Services Activity at 7-month low

India’s service sector activity slipped to a seven month low in April, due to weak rise in sales amid competitive pressures and disruptions arising from elections.

Nikkei India Services Purchasing Managers' Index dropped to 51 in April from 52 the previous month. The reading came in below the average for 2018, which was 51.6, underscoring a loss of momentum in the sector. A reading of above 50 in this survey-based index indicates expansion; below that shows contraction.

Another survey last week showed manufacturing activity growing at its slowest pace in eight months in April, owing to a sluggish increase in new orders. The Nikkei India Composite PMI Output Index, which combines both services and manufacturing, fell from 52.7 in March to 51.7 in April.

In its monthly review of the economy for March, the finance ministry said the economy appeared to have slowed down slightly in 2018-19. It is forecast to grow 7% in FY19 and 6.5% in the January-March quarter.

Growth in services was linked to greater bookings, improved facilities and effective marketing, but De Lima added that competitive conditions and a shift towards online bookings among customers reportedly restricted new business gains and, in turn, growth of activity.

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

The rise in total sales at service providers was supported by stronger demand from overseas markets, as signalled by the quickest increase in new export business for ten months.

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