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Services PMI falls to 50.7 in April; registers third straight monthly decline

06 May 2013 Evaluate

Growth in services sector, which make up nearly 60% of country’ economics output, eased dramatically during April as new orders came in at a much slower pace, prompting firms to rein in hiring plans. As per the HSBC services Purchasing Managers’ Index (PMI), based on a survey of around 400 companies, fell to its slowest pace in one and half years to 50.7 in April from 51.4 in March.  

The services sector growth which rose an 18-month high in January, fell for its third straight month in April and took the index dangerously close to the 50 mark that separates growth from contraction.  Although the business placed in firm rose during April, service providers mentioned extreme weather and challenging market conditions for the slower pace of growth.

Service providers also stated that delayed payments from clients had resulted in increased levels of unfinished business.  Moreover, the growth in payroll numbers eased in service sector and the rate of job creation was modest and the slowest in the current 14-month sequence of hiring.

Similarly, the HSBC India Composite Output Index, which measures activity in both the manufacturing and services sector, also came down to 50.5, from 51.4 in March, indicating that activity increased marginally and at the slowest pace since October 2011.

Further, April data signaled broadly steady inflation reading even as input prices continuing the trend that started in April 2009, rose during April. Subsequently, services companies increased their selling prices. However, the rate of increase in average selling prices were slower at service providers as the overall rate of charge inflation moderate and the slowest in 30 months.

Furthermore, firms operating in the Indian service sector remained optimistic towards output growth in the short-term. Service sector firms linked positive sentiment to expectations of stronger demand, increased marketing and maintained brand reputation. The degree of positive sentiment was little changed from March and remained strong.

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