Services sector output growth further eases in Dec

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SME Times News Bureau | 06 Jan, 2021
India's services sector output growth further eased in December, but remained on on the recovery path.

The IHS Markit India Services PMI data showed that both output and new business rose for the third straight month in December but at a slower pace than previous months. The data report cited that staff hiring came to a halt due to liquidity concerns, labour shortages and subdued demand, while business optimism faded.

Consequently, the seasonally adjusted index reading remained above the critical 50-mark that separates growth from contraction for the second month in a row during November.

Despite falling from 53.7 (index reading) in November to 52.3 in December, the latest figure pointed to the slowest pace of expansion over the aforementioned sequence.

Companies indicated that growth was supported by securing of new work, though curbed by competitive pressures, and the Covid-19 pandemic.

"Global Covid-19 restrictions, particularly travel bans, reportedly restricted international demand for Indian services at the end of 2020. New export business decreased sharply, but at the slowest pace since March," the report said.

"Job shedding was resumed in December, with some firms mentioning that liquidity problems, labour shortages and subdued demand caused the latest fall in employment. The decline in payroll numbers was the ninth in ten months, but marginal overall," it added.

Resultantly, the Composite PMI Output Index fell from 56.3 in November to 54.9 in December, with underlying data showing slower rates of expansion at both manufacturers and service providers.

"Similarly, aggregate new orders rose for the fourth month running but at the weakest rate since September. Manufacturers and services companies saw weaker expansions," the report said.

"Private sector employment declined in December, marking a ten-month sequence of contraction. The rate of reduction was slight, but quickened from November," it added.