In a positive surprise, India’s service sector activity touched a ten-month high in December, on the back of significant rise in new business orders. The seasonally adjusted Nikkei Business Activity index tracking changes in activity at Indian services companies on a month-by-month basis surged to 53.6 in December from November's 50.1, marking a sixth month above the 50-level that separates growth from contraction.
According to the survey, even though the manufacturing production dipped in the month of December, the seasonally adjusted Nikkei India Composite PMI Output index, which maps both manufacturing and services sectors, rose to 51.6 in December from November’s five-month low of 50.2.
The survey highlighted that the growth of private sector output in December was largely driven by services sector as manufacturing production decreased for the first time since October 2013. The data for December was indicative of a solid expansion in output across the sector. Sub-sector data indicated that output rose in four of the six broad areas of the service economy, the exceptions being Hotels & Restaurants and Transport & Storage. The best-performing categories in December were ‘Other Services’ and Financial Intermediation. Leading services activity to increase was a solid rise in incoming new work, one that was faster than that seen in November.
The survey notified that even as service provider’s sentiment improved in December, the degree of confidence was the second-weakest. Business sentiment was restricted by worries regarding the consequences of natural disasters. A stronger rise in new business and an improvement in year-ahead expectations at service providers are positive developments, but the overall health of the economy remains fragile amid a weak manufacturing sector.