Services PMI growth accelerates for 16 straight month to 54.5 in October

India’s Services sector activity accelerated in October backed by sharp increase in new business orders amid strong demand and improved market conditions. The recent data indicated that this placed pressure on firms’ capacity as backlogs of work rose further, but employment levels were unchanged over the month. Input costs increased again, although at a marginal rate that was softer than in September. The seasonally adjusted Nikkei India Services Business Activity Index rose to 54.5 in October from 52.0 in September. The latest readings are above the no-change mark of 50.0 for the sixteenth straight month, highlighting ongoing growth in the sector. A reading above 50 indicates economic expansion, while below the points towards contraction.

The seasonally adjusted Nikkei India Composite PMI Output Index rose to 55.4 in October from 52.4 in September. This pointed to a marked pace of expansion in private sector activity that was the quickest in nearly four years. Further, the upturn was supported by greater client requests and improved demand conditions. Manufacturing order books also rose at a quicker pace, with growth climbing to a 22-month high. Also, boosting growth of services output was a pick-up in new orders, which expanded at a solid pace that was faster than in September. The October data highlighted ongoing pressures on Indian service providers’ capacity, as unfinished business volumes rose for the fifth consecutive month. Service sector employment was unchanged over the month, while manufacturing staffing levels stagnated in October.

Further, Indian services companies remained upbeat towards the 12-month outlook for activity, but the overall level of sentiment was at a four-month low. Those firms anticipating growth indicated that improved market conditions and aggressive marketing campaigns are expected to boost activity. Higher prices paid for petrol resulted in a further increase in average input prices facing services firms.