India’s service sector activity expanded in the month of May at strongest rate in over 11 years even after input cost inflation climbs to new record. The upturn was supported by a substantial pick-up in new business growth as demand continued to recover following the reopening of the economy after COVID-19 lockdowns.
As per the survey report, the seasonally adjusted S&P Global India Services PMI Business Activity Index surged to 58.9 in May from 57.9 in April. Further, the S&P Global India Composite PMI Output Index -- which measures both manufacturing and services -- also improved to 58.3 in May from 57.6 in April.
On the inflation front, the rate of inflation climbed to the highest in 16-and-a-half years of data collection. Services companies continued to transfer rising cost burdens through to customers via upward adjustments to selling prices. Little-changed from April, the overall rate of charge inflation was the second-highest in close to five years.
The report further noted that despite remaining optimistic towards the 12-month outlook for business activity, firms remained concerned that inflationary pressures would dampen the economic recovery. The overall level of positive sentiment improved from April, but remained historically low.
