India’s services sector growth lost its momentum in the month of February, falling to a six-month low, as activity and new work orders shrank amid weak underlying demand conditions. Besides, accelerating input cost inflation and rising output charges, also pulled the index lower below the 50.0 no-change mark. The seasonally adjusted Nikkei Services Business Activity Index contracted to 47.8 in the month of February from 51.7 in January. The Nikkei India Composite PMI Output Index, which measures both manufacturing and services, also fell to 49.7 in February from 52.5 in January.
As per the survey report, the headline figure signalled the first fall in output for three months, but one that was modest. However, service providers remained optimistic towards the 12-month outlook for output, as staffing levels in the Indian service sector accelerated to the joint-strongest since June 2011, despite unfavourable demand conditions. Besides, factory employment also grew at the strongest pace in the context of historical data, even it was modest. The survey panel members stated that the new work decreased along with weak market demand and competitive conditions.
Further, service providers recorded higher levels of outstanding business in the reported month, which they commonly associated with delayed payments. Similarly, backlogs at manufacturers increased at a modest pace but the rate of accumulation was strongest since October 2016. On the inflation front, input cost inflation in the Indian service sector quickened to the strongest since November, on the back of factors like greater fuel prices. Across manufacturing companies, input cost rose for the twenty-ninth consecutive month in February.