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Strongest growth of service sector in India since October 2016

Staff Writer |
The Indian service sector remained in expansion territory for the second consecutive month in July.

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Moreover, the latest upturns in business activity and new orders were the fastest since October 2016 and June 2017 respectively.

Amid reports of improved demand conditions, business confidence towards the 12-month outlook picked up from June’s recent low.

Subsequently, firms raised their staffing levels at the strongest pace since April.

However, inflationary pressures remained marked during July.

The seasonally adjusted Nikkei India Services Business Activity Index posted above the neutral 50.0 threshold for the second consecutive month in July.

Moreover, rising from 52.6 in June to 54.2, the latest reading signalled the strongest rate of output growth since October 2016.

Favourable demand conditions were cited by panellists as the key factor behind the latest upturn.

The headline seasonally adjusted Nikkei India Composite PMI Output Index rose from 53.3 in June to 54.1 in July, driven by output growth in both the manufacturing and service sectors.

The latest rise in overall output was marked and the strongest seen since October 2016.

Amid reports of strong underlying demand, manufacturing companies raised output for the twelfth consecutive month in July.

Although softening from June’s six-month high, the rate of expansion was marked.

Underpinning the expansion in service activity was a further rise in new business inflows.

Moreover, the rate of expansion quickened to the fastest since June 2017.

Strong market demand was associated by panellists with growth in new client wins.

Service companies projected a rise in activity in the next 12 months, with the level of sentiment picking up from June’s recent low.

An expected improvement in demand conditions was the key factor supporting business confidence, according to respondents.

Subsequently, Indian service providers raised their staffing levels during July.

Moreover, the rate of job creation was the strongest since April.

Anecdotal evidence highlighted that increased output requirements contributed to higher employment levels.

Meanwhile, manufacturing companies raised their payroll numbers for the fourth consecutive month in July, albeit at a marginal pace.

On the price front, input costs rose for the twentythird consecutive month across the service sector during July.

Moreover, input cost inflation accelerated to the fastest since March.

There were reports that higher food and fuel prices contributed to upward cost pressures.

In contrast, input cost inflation across the manufacturing sector eased from June’s near fouryear high and was in line with the series trend.

Panellists reported that steel and oil were among the key items that increased in price.

Despite a marked rise in cost burdens, service providers raised their output charges at the slowest pace since March 2017.

Underlying data highlighted that firms were unable to fully pass on greater cost burdens to price-sensitive clients.

Meanwhile, manufacturers raised their output charges for the twelfth successive month in July.

That said, the latest increase was modest and softened since June’s four-month high.

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