Recovering from the last month’s fall, the Indian services sector bounced back to growth in the month of June, on the back of strongest rise in new business. Acceleration in job creation coupled with improved demand conditions, also drove overall business activity during the month. However, the input inflationary pressure remained solid overall, amid higher fuel costs.
As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index rose back above the 50.0 no-change mark in June, posting reading at 52.6 from 49.6 in May. The Nikkei India Composite PMI Output Index which measures both manufacturing and services too climbed to 53.3 in June from 50.4 in May, signaling solid rate of expansion since October 2016.
The report also found that new orders grew across the service sector at fastest rate in a year, backed by strong underlying demand, while new business at manufacturing companies also rose at the fastest rate since last December in June. However, backlogs of work increased at service providers in June, stretching the period of expansion to 25 months, on account of stronger demand and delayed payments.
On inflation front, input cost inflation in the service sector remained solid and was broadly similar to the prior survey period. Besides, manufacturers also remained cost burdened in the reported month, as strongest rise in input costs since July 2014 in June. Further, output charge inflation rose in the reported period with the service companies passing on higher cost burdens on to clients but at the slowest pace in over a year.