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Last updated: 06 Jul, 2017  

Service generic Service sector grows to 8-month high in June: PMI

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SME Times News Bureau | 06 Jul, 2017
Country's service sector activity rose to an eight-month high of 53.1 in June boosted by a significant jump in new work orders, indicating a solid upturn in output across the sector, key macro-economic data showed on Monday.

The seasonally adjusted Nikkei India Services PMI Business Activity Index registered a higher rate of expansion at 53.1 in June, up from 52.2 in May. An index reading of above 50 indicates an overall increase in economic activity, and below 50 an overall decrease.

"Up from 52.2 in May to an eight-month high of 53.1 in June, the seasonally adjusted Nikkei India Services PMI Business Activity Index signalled a solid and accelerated upturn in output across the sector," according to the survey by Nikkei.

"Business conditions in India's service sector continued to improve in June as a solid and accelerated upturn in new work resulted in a faster increase in activity," it said.

"Growth of service sector activity and inflows of new business picked up as better demand conditions and marketing efforts bore fruit," said Pollyanna De Lima, economist at IHS Markit and the author of the report.

"June's figure contributed to the highest quarterly average for the composite PMI (52.2) since Q2 (FY) 2016. This suggests that GDP growth is likely to rebound from the sharp slowdown noted in the first three months of 2017," she added.

In contrast to the trend for services, manufacturing lost growth momentum in June, with the upturn in production moderating for the third month in a row.

Although the manufacturing sector growth slowed to a four-month low in June, the larger weight of services in GDP offset the dip in manufacturing.

Consequently, the Nikkei India Composite PMI Output Index rose to an eight-month high of 52.7 in June, from 52.5 in May.

"With services being the prevalent sector in India, the fainter rise in manufacturing was more than offset and growth of private sector output climbed to an eight-month peak," De Lima said.

According to the report, greater workplace activity encouraged some services companies to recruit more staff.

Meanwhile, inflationary pressure gained pace, with both input costs and output charges rising at quicker rates.

"Amid reports of higher prices paid for food and fuel, average cost burdens at services firms increased further in June," it said.

According to De Lima, optimism weakened at goods producers and service providers alike, "hampered by concerns among some firms that the Goods and Services Tax (GST) could harm consumer demand, with competitive pressures also seen as a threat to the outlook."
 
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