Recovering from last month’s steep fall, the services sector bounced back to growth in the month of December, on the back of stabilization in new order inflows along with easing inflationary pressures. Fastest job creation at both service providers & manufacturers coupled with growth in some industries such as information & communications and finance & insurance, also drove overall business activity during the month. However, the Goods and Services Tax (GST) continued to weigh on underlying sales volumes of some of the firms.
The seasonally adjusted Nikkei Services Business Activity Index rose back above the 50.0 no-change mark in December, posting reading at 50.9 from 48.5 in November. The Nikkei India Composite PMI Output Index which measures both manufacturing and services too climbed to 53.0 in December from 50.3 in November, signaling highest rate of expansion since October 2016.
As per the survey, demand conditions improved in the service sectors after the last month’ decline, while manufacturing new orders grew at sharpest rate since October 2016, backed by strong demand from domestic and international markets. However, backlogs of work increased at both manufacturers and service providers, on account of cash shortages and delayed customer payments.
On inflation front, input cost inflation in the service sector eased from November’s four-year high which softened output charge inflation during the month. On the other hand, manufacturers remained cost burdened in the reported month due GST and to compensate this, firms raised their average selling prices at the fastest pace in 10 months.
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