Buoyant demand pushes services PMI to a 6-month high in Jan

New Delhi: India’s services sector recorded the quickest expansion in six months in January, boosted by buoyant demand from domestic and external clients, an industry survey conducted by S&P Global showed.

Purchasing Managers’ Index (PMI) for services rose to 61.8 in January from 59 in the previous month. PMI reading above 50 indicates growth in the sector while below 50 shows contraction.  

"New business expanded at a faster pace and managers’ expectation for future activity was strong,” said Ines Lam, economist at HSBC.  

According to survey participants, growth was spurred by demand buoyancy, productivity gains and rising intakes of new work.

There was also a notable upturn in new export orders. "Monitored firms signalled gains from clients across the globe, including Afghanistan, Australia, Brazil, China, Europe, the UAE and the US," S&P Global said in the report released on Monday.

Amid buoyancy in demands inflationary pressure increased led by a sharp jump in food, freight and labour costs. Input price inflation in January rose to the highest level in five months.

Despite the surge in input costs, selling prices remained largely unchanged. Only 6% of the companies that participated in the survey increased their selling price during the month under review.

Consumer services by far led the rise in input costs, but it was in transport, information and communication that the quickest increase in selling prices was registered.

“Output price inflation was lower compared with previous months as firms opted to keep prices unchanged, which suggests some costs were absorbed in order to maintain demand,” said Rahul Bajoria, managing director and head of emerging markets Asia economics (excluding China), at Barclays.

The report is based on responses from around 400 services companies. The sectors covered include consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services.  

Business confidence improved further at the start of the final fiscal quarter, with services companies at their most upbeat since last September. Besides demand strength, firms expect investment and productivity gains to induce output growth in the year ahead, the survey showed.

The upturn in the services sector in January was more pronounced than the manufacturing sector. Manufacturing PMI increased to a four-month high of 56.5 in January driven by a sharp uptick in new orders, as per data released by S&P Global on February 1.