Impacted for the second successive month by the goods and services tax (GST), India’s services sector registered another monthly decline in activity in August. Though, the seasonally adjusted Nikkei Services Business Activity Index rose to 47.5 in August from 45.9 in July, the reading was below the watershed ‘50’ mark which means contraction, mainly due to second consecutive drop in new business. The Nikkei India Composite PMI Output Index which measures both manufacturing and services stood at 49.0 in August as against 46.0 in July, with a weaker pace of reduction that was only slight.
As per survey report, the rate of contraction was less severe in August month compared to the previous month. It said that the rebound from July’s downturn in manufacturing production was unable to offset the contraction in services activity. Private sector output witnessed subsequent declined again, while new business also mirrored trend of services activity, decreasing for the second month in a row but at a slower rate. Besides, the decline in employment continued for the second straight month amid evidence of the non replacement of voluntary leavers.
On the inflation front, input costs rose at a quicker rate, while output charge inflation softened from July’s 53-month peak in August. In the manufacturing industry, purchase prices increased at the slowest pace in one year. The report further said that service providers’ outstanding business volumes increased due to delayed payments from clients. Payroll numbers in the service economy decreased in August, the decline in employment was the second in successive months, but job shedding eased to a marginal pace as the vast majority of service providers left headcounts unchanged.