Service Expansion! India Oct Nikkei services PMI stands at 52.6

The latest improvement was driven by services, as goods producers saw growth of production wane. Posting an eight-month high of 53.2 in October (September: 51.3), the seasonally adjusted Nikkei Services Business Activity Index indicated that output across the sector rose at a faster rate.

Rising from 51.5 in September to 52.6 in October, the seasonally adjusted Nikkei India Composite PMI Output Index pointed to a stronger expansion in private sector activity across the country that was the joint-fastest since March. The latest improvement was driven by services, as goods producers saw growth of production wane.

Posting an eight-month high of 53.2 in October (September: 51.3), the seasonally adjusted Nikkei Services Business Activity Index indicated that output across the sector rose at a faster rate. Activity growth was noted in three of the six surveyed categories, led by Post & Telecommunication.

Underpinning growth of services activity was a quicker increase in new business inflows. Incoming new work expanded at a solid pace that was the most pronounced since February. According to panellists, demand conditions improved. Order book volumes in the manufacturing economy also rose, albeit at the weakest pace in the current 24-month sequence of expansion.

October data indicated that service sector employment was unchanged. Approximately 98% of survey members reported no change in payroll numbers since the preceding month. Goods producers signalled higher staffing numbers, but the rate of job creation was only marginal. Meanwhile, unfinished business levels in theservice sector were broadly unchanged, with the respective index registering only fractionally above the no-change mark of 50. Manufacturers posted a third consecutive monthly reduction in backlogs, signalling ongoing spare capacity in the sector.

Amid reports of higher prices paid for petrol and food, input costs faced by service providers rose in October. Nonetheless, the rate of increase was relatively muted in the context of historical data. Purchase prices at manufacturers rose for the first time in three months and at a rate that, although modest, was the quickest since May.

Services companies in India lowered their selling prices for the second successive month in October. That said, the pace of reduction was only marginal. Efforts to improve competitiveness was the main reason cited by respondents for the latest decline in tariffs. Three of the six monitored categories registered falling charges, these being Post & Telecommunication, Transport & Storage and ‘Other Services’. The reduction in selling prices at services firms offset higher charges at goods producers, and tariffs across the private sector as a whole fell for the second month running. 

Services business sentiment regarding the 12- month outlook for activity remained positive in October. In fact, the degree of confidence signalled was the strongest since July. Underpinning optimism were expectations of a pick up in demand. The strongest levels of confidence were seen in the ‘Other Services’ and Hotels & Restaurants categories.

Commenting on the Indian Services PMI survey data, Pollyanna De Lima, economist at Markit, which compiles the survey, said, “India’s economic growth shifted into a higher gear in October, driven by the service sector. Although manufacturing production continued to expand, growth eased and was sluggish by historical standards.

“The upwards trend in private sector output reflected stronger inflows of incoming new work, one that was the most marked since March. Services companies saw a faster rise in new business than their manufacturing counterparts, with data implying that price discounts supported growth of new projects.

“Private sector firms remained wary of costs and left payroll numbers, once again, unchanged. Average input prices rose in both the service and manufacturing sectors, although at rates that were relatively weak.”