Services sector growth enters contraction mood; HSBC India Services PMI at 49.6 in May

03 Jun 2015 Evaluate

Services sector growth slipping to its 13 month low has entered the contraction mood. Registering 49.6 in May, from 52.4 in April, the seasonally adjusted HSBC India Services Business Activity Index, which tracks changes in activity at Indian services companies on a month-by month basis - recorded below the crucial 50.0 threshold level for the first time in 13 months and falling back into contraction mood after experiencing growth for six successive months..

The seasonally adjusted HSBC India Composite PMI Output Index based on original survey data collected from a representative panel of over 800 companies based in the Indian manufacturing and service sectors, which measures activity in both the manufacturing and services sector fell to a seven-month low of 51.2 in May, from 52.5 in April, indicating that private sector output rose further, but at a weaker rate.

The service providers reported rising cost burdens in May. The increase in input prices gathered pace since April, but was weaker than the long-run survey average. However, undeterred by weaker demand, Indian services companies hired additional workers in May, but at manufacturers, payroll numbers were broadly unchanged from the prior month.

Indian service providers reported rising cost burdens in May. The increase in input prices gathered pace since April, but was weaker than the long-run survey average. The data compiled from monthly replies to questionnaires sent to purchasing executives in around 350 private service sector companies have given reason of higher salaries paid to staff and rising petrol costs for the latest increase in average input prices.

The Services Purchasing Managers' Index came in contrast with the Manufacturing PMI. Although, firms increased prices at their fastest pace since April 2014 as input costs jumped, but the new order growth across private sector remained weakest in last 13-month. There was marginal increase in private sector employment and the sector is expected to see a rebound in coming months.

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