Oct services' output expands at fastest pace in over 10 yrs

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SME Times News Bureau | 04 Nov, 2021
India's services sector output grew at the fastest rate in over 10 years in October, the IHS Markit India Services PMI said on Wednesday.

According to the PMI report, the recovery of India's service sector was extended to October, with companies indicating a notable pick-up in new businesses which led to the fastest expansion in output in over a decade.

"More jobs were created as a result, though business confidence remained subdued due to growing concerns surrounding price pressures," the report said.

"With input costs again rising sharply, companies lifted their fees at the fastest pace in close to four and a half years."

Consequently, the seasonally adjusted India Services Business Activity Index showed that output expanded at the rate of 58.4 (index reading) in October from 55.2 in September.

Moreover, the current sequence of expansion was extended to three months.

As per panel members, ongoing improvements in demand boosted growth of sales and subsequently output.

"Indeed, new work intakes increased at a sharp and accelerated rate, the strongest since July 2011. Moreover, the latest upturn was the third in successive months. Survey participants commonly linked sales growth to better underlying demand and successful marketing."

"Indian firms were able to secure a healthy intake of new work despite charging more for their services. Output prices rose at a solid rate that was the strongest since July 2017. Anecdotal evidence suggested that additional cost burdens were passed on to clients."

Besides, the overall private sector output in India increased at a sharper rate in October as growth quickened among both manufacturers and service providers.

Resultantly, the Composite PMI Output Index rose from 55.3 in September to 58.7 in October, signalling the strongest monthly expansion since January 2012.

The upturn in business activity was supported by a substantial rise in new work intakes, said the report which added that aggregate sales increased at a sharp rate that was the quickest since early-2012.

"October data pointed to a second successive monthly increase in private sector employment, but the rate of expansion was only slight as growth among service providers was partly offset by job shedding at goods producers."

"Price pressures intensified in October, with the aggregate rate of input cost inflation climbing to the joint-highest in over nine years. The rate of charge inflation was moderate in comparison, but nevertheless the fastest since mid-2017."

According to Pollyanna De Lima, Economics Associate Director at IHS Markit: "A substantial rise in prices charged for the provision of services in India had no detrimental impact on demand, as companies signalled the strongest monthly expansion in new business in over a decade."

"Hence, the recovery of the sector entered its third straight month, with firms scaling up activity at the fastest pace in ten-and a-half years and creating more jobs. That said, service providers were concerned that persistent inflationary pressures could deter growth in the coming year."

"Business confidence remained subdued in the context of historical data. Companies' expenses rose notably from September, which survey participants mainly linked to higher fuel, material, retail, staff and transportation costs."