Services PMI eases in Feb; inflation at 2-year low: S&P

New Delhi: Services’ business activities expansion eased in February when compared with the previous month due to a slowdown in growth in new orders and output even as inflation declined to the lowest level in two years, an industry survey conducted by S&P Global showed.

Purchasing Managers’ Index (PMI) for services declined to 60.6 in February, down from 61.8 recorded in the previous month.

Despite the easing, the growth remains robust. PMI reading above 50 indicates growth in the sector while below 50 shows contraction. The PMI print has been above the 50 mark for 31 months in a row.

New business from abroad placed with services firms in India rose for the 13th successive month. Survey participants reported gains in business from Australia, Asia, Europe, the Americas and the UAE. Collectively, international sales expanded at a solid rate that was among the best in the nine-and-a-half-year series history, S&P Global said in the monthly report.  

Business confidence regarding the year-ahead outlook for activity weakened in February. Only around 26% of companies, which participated in the survey, foresee growth.

“India’s services PMI suggests that the pace of expansion in the services sector eased in February from January. Due to a slowdown in growth in new orders and output, services companies’ outlook for future business activity, while remaining strongly positive, weakened slightly,” said Ines Lam, economist at HSBC.  

Lower business confidence dampened employment growth as the pace of hiring growth was the slowest in 21 months. “Survey members mostly indicated that workforce numbers were sufficient for current requirements,” the rating agency noted in the report.    

Both input and output price inflation moderated in the month, indicating controlled price pressures. Services inflation declined to the lowest level in two years. Operating expenses rose further, but the pace of increase was the second lowest since August 2020.

Despite some fluctuations, both services and manufacturing sectors have witnessed robust expansion in the recent months. Manufacturing PMI rose to 56.9 in February, the highest level in five months, helped by lower inflationary pressure and high global demands, as per data released by S&P Global last week.

“The manufacturing and services PMIs continue to exhibit remarkable demand strength in the economy since 2023, corroborated to an extent by the hard GDP data of Q4 2023,” said Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays.

“We accordingly raised our GDP growth forecast for both FY2023-24 and FY2024-25 to 7.8% and 7%, respectively,” he added. In the recent October-December quarter (Q3 FY2023-24) India’s GDP growth surged to 8.4%, beating expectations.