Falling to a three-month low, India’s services sector lost its momentum in the month of May, on a broad stagnation in new orders. Besides, accelerating input cost inflation coupled with slower job creation, also pulled the index lower below the 50.0 no-change mark. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index contracted to 49.6 in the month of May from 51.4 in April. The Nikkei India Composite PMI Output Index, which measures both manufacturing and services, also fell to 50.4 in May from 51.9 in April.
The report found that output of services sector declined due to competitive demand conditions and modest growth in the manufacturing sector outweighed the marginal decline in the service sector. Further, it said that though the new business at manufacturing firms grew to continue expansion rally for seventh successive month, rate of expansion was the weakest in three months. Further, backlogs at service providers rose marginally in May, on higher volumes of unfinished business due to delay in payments by clients.
On inflation front, input cost inflation in the service sector picked up from April’s eight-month low on account of higher salaries along with rising oil and vegetables prices. Manufacturers companies also remained cost burdened for the thirty-second consecutive month in the reported month. However, service sector output charge inflation during the month fell marginally to an 11-month low.