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India’s service sector growth hits 19-month high of 54.3 in January

03 Feb 2016 Evaluate

In a pleasant surprise, India’s Services PMI expanded at its fastest speed in 19 months in January. The seasonally adjusted Nikkei Services Business Activity Index stood at 54.3 in January compared to 53.6 in December, driven by strengthening underlying demand and improved weather conditions. January also marked the seventh consecutive month of expansion in new business, above the 50 level that distinguishes growth from contraction with that sub-index rising to an 11-month high of 54.1 from 53.8. The demand accelerated, allowing firms to build up a much bigger backlog of orders.

Growth was noted in four of the six monitored categories, the exceptions being hotels & restaurants and transport and storage. As per the survey, the seasonally adjusted Nikkei India Composite PMI Output index, which maps both manufacturing and services sectors, climbed from 51.6 in December to an 11-month high of 53.3 in January.

The survey further noted that a strong upturn in new business is a positive note from January's survey, which underpins hopes for further growth of activity across the country's private sector in the near-term. Moreover, the upswing in demand may boost the labour market and help end the long run of subdued employment trends. During January, higher workloads encouraged service providers to hire additional staff in January, following stagnation in the prior month.

The New Year saw a boost to economic conditions across India’s private sector. The surge in service output growth is another set of positive news at the start of the year for the economy since manufacturing also rose in January as showed by the Nikkei India Manufacturing Purchasing Managers' Index which was a 4 month high of 51.1. Amid forecasts of further improvements in demand and favourable government policies, service providers in India expect output to continue to increase over the course of the next year.


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