Services growth slips, drags private sector activity to a one-year low in November

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The momentum in India’s services sector faltered to a one-year low in November. Image used for representation purpose.
| Photo Credit: K.R. Deepak

The momentum in India’s services sector faltered to a one-year low in November, as per the seasonally adjusted S&P Global India Services Business Activity Index which slid to 56.9 from 58.4 in October, with widespread slowdowns in growth rates for new orders and output.

Taken together with the manufacturing Purchasing Managers’ Index (PMI) for November released earlier, last month marked the weakest rise in private sector activity in the country in a year. The S&P Global India Composite PMI ® Output Index eased from 58.4 in October to 57.4 in November.

New export orders for services firms grew at the slowest pace since June even as input costs and output prices rose at an eight-month low rate. While firms surveyed for the index remained positive about business prospects in the year ahead, there was some evidence of optimism levels fading thanks to worries about inflation rising.

Outstanding business volumes were broadly stable among services firms, which triggered a restrained approach to fresh employment. Though net employment still expanded in November, it was at a pace that was the weakest since April this year.

Firms reported a further increase in operating expenses, with labour, food, material and transportation costs rising since October, but the overall uptick in costs was below the long-run average. Consumer Services firms recorded the highest rate of input cost inflation.

On the other hand, the pace at which prices were raised was above the long-run trend, despite being the slowest in eight months. The strongest upturn in selling prices was evident in the Finance & Insurance category.

“India’s service sector has lost further growth momentum midway through the third fiscal quarter, but we continue to see robust demand for services fuelling new business intakes and output,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, which compiles the survey-based index.

With some relief on the costs front, fewer companies hiked their own fees in November, an aspect that might provide a further boost to demand as 2023 draws to a close, Ms. De Lima noted.

“Understandably, given the lack of pressure on operating capacities signalled by stable backlog levels, services firms became more cautious when it comes to hiring,” she added.

While factory orders rose by a greater extent, demand for services somewhat cooled, the firm said. Both input costs and output charges increased at the slowest rates since March, but services firms faced a more pronounced inflation in costs. Overall business optimism remained ‘strongly upbeat, but faded to a six-month low’, S&P Global Market Intelligence underlined.

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