India’s services sector activity slowed in the month of February but remained comfortably above the neutral mark of 50.0 and signaled a sharp rate of expansion that was well above the series history (since December 2005), as positive demand trends supported sales and business activity. Business activity increased across all parts of the service sector. Finance & Insurance saw the strongest pace of growth by a considerable margin, with the slowest rise registered in Real Estate & Business Services.
According to the survey report, the seasonally adjusted HSBC India Services PMI Business Activity Index eased to 60.6 in February from 61.8 in January. Further, the HSBC India Composite PMI Output Index -- which measures both manufacturing and services -- also slowed down to 60.6 in February as against 61.2 in January. The report said that companies created jobs on the back of rising workloads, but the easing of capacity pressures and lower confidence towards the outlook dampened employment growth.
Further, new business from abroad placed with services firms in India rose for the thirteenth successive month. Collectively, international sales expanded at a solid rate that was among the best in the nine-and-a-half-year series history. Outstanding business volumes expanded for the twenty-sixth consecutive month halfway through the final fiscal quarter, highlighting sustained pressure on the capacity of service providers. The latest increase was mild and the weakest in three months.
On the price front, operating expenses rose further, but did so at the second-weakest rate since August 2020. Higher food, freight and labour costs pushed up input prices. Indian companies operating in the service sector sought to protect their margins by raising prices charged to customers. The rate of inflation was slight, below its long-run average and cooled to the weakest in two years. Besides, business confidence regarding the year-ahead outlook for activity weakened in February.
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