update

Services activity grows at slower pace in July.

     The activity in Indian services sector, which accounts for around 60% of Indian GDP, slightly eased in the month of July due to slowdown in new business orders. The HSBC services Purchasing Managers’ Index (PMI), based on the survey of around 350 private service sector companies, fell to 52.2 in July from17-month high at 54.4 in June. Though the pace of output slowed from June, the latest reading stood above 50 mark indicating third successive monthly expansion in Indian services sector. Among the six monitored sub-sectors, only Hotels & Restaurants and Transport & Storage companies registered reductions in services activity.

     The HSBC Survey indicated that new business in the service sector rose for a third month in a row in July, indicating improvement in demand. The rate of expansion was reduced from the previous month but remained solid. Amid reports of stronger demand and delayed payments from clients, levels of outstanding business rose in July, extending the current sequence of growth to five months. The HSBC India Composite Output Index, which measures activity in both the manufacturing and services sector, declined from June’s16-month high of 53.8 to 53 in July.

     The survey signaled a steady inflation reading with input costs faced by Indian services firms increased for a sixty-fourth consecutive month in July owing to higher prices of oil and food products. However, the rate of cost inflation slowed from June and was weaker than the series average. Accordingly, services firms passed increased cost burden to consumers, marking a 62-month period of charge inflation. The survey highlighted that staffing levels in the Indian service sector fell fractionally in the reported month. Indian services companies also maintained their positive outlook for output growth over the next 12 months on the back of supportive factors such as forecasts of stronger demand, new government policies and the introduction of new marketing initiatives.