India’s services sector activity fell in the month of August from July’s 21-month peak, primarily due to the weakest growth in new work. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index dropped to 51.5 in August from 54.2 in July, signaling the slowest growth in the current sequence. However, the index managed to remain above the neutral 50.0 threshold for the third consecutive month in August. Further, the Nikkei India Composite PMI Output Index which measures both manufacturing and services too fell to 51.9 in August from 54.1 in July.
The report also noted that new business placed at Indian service providers rose for the sixth consecutive month in the reported month, owing to strong market demand but the rate of expansion was slight and moderated from July’s 13-month high to the weakest since May. Subsequently, firms raised their staffing levels at the slowest pace since last November.
On the inflation front, Indian service providers faced higher input costs during August, on account of higher oil-related prices. The report further found that the service firms raised their selling prices at a marginal pace that was close to July’s 16-month low, as they could not fully pass higher cost burdens to clients due to competitive conditions. On a positive note, business confidence rose in August to the highest level since May. Besides, positive projections for activity in the next 12 months were rooted in upbeat forecasts of sales, an expected improvement in demand and promotional activities.