Services PMI eases after hitting 12-year high in February

Expansion in services activities moderated in March after hitting a 12-year high in the previous month as new business inflows increased at a slower pace, an industry survey showed.

S&P Global India Services Purchasing Managers’ Index (PMI) declined to 57.8 in March from 59.4 recorded in the previous month. February's PMI level was the highest since 2011.

The services PMI is now above 50 for the 20th month in a row. PMI index above 50 marks expansion in the sector while a score below 50 denotes contraction.

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Despite rising for the tenth month in a row, services employment grew only fractionally in March. Close to 98 per cent of survey participants left payroll numbers unchanged amid sufficient staff levels for current requirements.

“Weakness was seen with regards to jobs, with broadly no change in employment seen neither in services nor in manufacturing as a general lack of pressure on operating capacities and diminished confidence towards growth prospects prevented hiring activity,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

When providing their assessments of growth prospects, service providers were on average optimistic that output would expand in the year ahead. Demand strength and marketing efforts were the main reasons supporting business confidence. Nevertheless, the overall level of positive sentiment fell to an eight-month low as several firms foresee no change in activity from present levels.

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There was a further increase in input prices at Indian services firms, amid reports of higher food, fuel, transportation, and wage costs.

However, with a large proportion of survey participants signalling no change in expenses since February, the overall rate of inflation was mild and the weakest in two-and-a-half years.

Backed by demand buoyancy, service providers shared part of their additional cost burdens with clients in March via an upward revision to selling prices. The rate of charge inflation picked up to a three-month high.

“Input price pressures in the service economy continued to subside, alongside the trend seen in manufacturing,” De Lima said.

The rise in overall new business was supported by an increase in international sales. Companies commonly mentioned an improvement in external demand for their services.