The growth of services activity in India slowed to a seven-month low in June amid softer expansion in new business orders, adding to the clamour for rate cuts by the Reserve Bank. The seasonally adjusted Nikkei Services Business Activity Index, which maps the service sector activity, fell to 50.3 in June from 51 in May, one of the lowest readings in the current 12-month sequence of above-50 readings. A reading above 50 represents expansion, while one below means contraction.
Meanwhile, the seasonally adjusted Nikkei India Composite PMI Output Index, which maps both manufacturing and services sectors rose to a three-month high of 51.1 in June from 50.9 in May, but remained below its long-run average and pointed to a slight pace of expansion.
As per the survey, the new orders received by the Indian service sector grew at the slowest pace in eleven months. In contrast, manufacturing order books increased at the quickest pace since March, outweighing the slowdown in services and therefore contributing to a quicker expansion in private sector new business.
On price front, the input prices in the Indian service sector rose for the ninth consecutive month in June. Cost burdens among manufacturers rose at the slowest pace since March. Purchase prices among manufacturers increased again, but at the weakest pace since March. Prices charged by Indian service providers continued to rise in the latest survey period.
On the jobs front, Indian service providers signalled a slight increase in staffing levels during June. Moreover, future expectations dipped to the lowest since February, highlighting concerns regarding the sustainability of the economic upturn. Although manufacturing was higher in June, variables such as new orders, employment and production stayed below their respective long-run averages.
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