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India’s services sector activity contracts for second straight month in October

05 Nov 2019 Evaluate

India’s services sector activity contracted for second straight month in October, due to subdued demand conditions, competitive pressures and a fragile economic situation. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index stood at 49.2 in October from 48.7 in September. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services - fell to 49.6 in October, as against 49.8 in September.

The report also found that total sales were broadly unchanged in October, after contracting in September for the first time in over a year-and a-half. Besides, pending client payments caused a renewed increase in outstanding business held by service providers. The rise in backlogs was marginal, but contrasted with depletion in September. Service sector employment increased for the twenty-sixth month in a row, albeit at the joint-slowest pace over this period.

On the inflation front, input price inflation accelerated to a one-year high in October, on account of higher freight, fuel, material, vegetable and staff costs. The upturn was, however, weaker than seen on average over the series history. Further, some companies passed on rising costs to their clients, but a number of firms absorbed additional cost burdens. As a result, average prices charged for the provision of services increased only modestly.

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