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Growth in India's services sector weakens in February

05 Mar 2013 Evaluate

India’s services sector activity, which makes up for nearly 60% of the country's economic output, after registering a 12-month high in January, increased at a notably slower pace in February amid a decline in new business orders. As per the seasonally adjusted purchasing managers' index (PMI) for the services sector, dropped to 54.2 in February from 57.5 in January.

The robust pace of growth in the services sector witnessed in January could not be sustained in the month of February and the PMI fell for the first time since November, but it has held above the 50 mark that separates growth from contraction - for the sixteenth successive month. Service providers are also optimistic about the 12-month outlook for the sector.

Helped by stronger demand, increased marketing and superior quality of services, new orders received by Indian service providers, increased further in February, but the backlogs of work also rose in month. Reflecting the growth in new business, output also increased during the month. In tandem with new business growth, service providers also raised their headcounts modestly.

At the same time, the HSBC India composite output index, which measures activity in both the manufacturing and services sector, declined to 54.8 in February from 56.3 in January, marking the weakest improvement in operating conditions in three months. The month of February saw output growth in the manufacturing sector being accelerated, whereas a slowdown was registered at service providers. 

With the rate of inflation accelerating in both manufacturing and services firms, the overall pace of price rise was sharp, and the fastest in seven months. Meanwhile, private sector companies continued to pass on higher costs to clients through increased output prices. The index stayed above the neutral mark for the forty-sixth successive month.

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