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Services PMI grows at fastest pace in a year in January

05 Feb 2013 Evaluate

Driven by rising foreign orders, India’s services sector logged a growth at its strongest pace in year during January. Marking a 45-month expansionary sequence, the seasonally adjusted HSBC Services Business Activity Index came at 57.5 in January, up from 55.6 in the previous month. The 50 mark separates growth from contraction and the index has held above that level for over a year now, even though Country appears set to finish the 2012-13 Fiscal Year with its slowest economic growth rate in a decade.

As has been the case since May 2009, the volume of incoming new work in the Indian private sector rose during January. With manufacturing and services companies both registering sharp growth, the overall rate of expansion was steep and the fastest in Eleven months. Whereas, growth in the manufacturing sector eased, services new orders rose at the fastest pace in 18 months.

The HSBC India Composite Output Index posted 56.3 in January, unchanged from December’s reading. Meanwhile, the activity in the Indian private sector improved during December for the forty-fifth successive month. The survey also showed input and output prices rising at a similar pace to the prior month, though much weaker than a year ago.

Meanwhile, the new business sub-index jumped to 58.3, the highest since August 2011, prompting firms to step up the pace of hiring. Payroll numbers in the Indian private sector rose for the eleventh month running in January, amid evidence of increased volumes of incoming new work. That said, the rate of job creation was only slight and broadly in line with that seen in December.

Further, January data signaled broadly steady inflation reading even as input prices continuing the trend that started in April 2009, rose during January. Furthermore, optimism was signaled by service providers in India during January, with approximately 42% of services companies predicting overall activity at their units to increase, with just 3% forecasting a decrease.

The report further highlighted broadly steady Inflation readings amidst simmering fuel, raw material and labour cost pressures that underscore the need for RBI to approach policy easing with caution.

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