India’s Services PMI Falls To The Lowest In 11 Months

An information technology park in the Electronic City area of Bengaluru. (Photographer: Dhiraj Singh/Bloomberg)

India’s Services PMI Falls To The Lowest In 11 Months

A gauge of India’s services sector fell to its lowest in 11 months as new business and output declined.

The India Services Business Activity Index, compiled by IHS Markit, stood at 41.2 in June compared with 46.4 in May, according to a media statement. A reading above 50 indicates expansion in business activity.

The Composite PMI Output Index, too, fell to 43.1 in June from 48.1 in May. That’s the sharpest rate of reduction since July 2020.

Also read: India’s Manufacturing PMI Contracts For The First Time In 11 Months

Subdued demand resulted in a second successive monthly drop in new business received by services firms, according to the statement. The pace of contraction was also the quickest since July 2020.

International demand for Indian services deteriorated further in June, with new export orders falling for the sixteenth consecutive month. The pace of contraction, however, eased from May.

In line with a further reduction in new work intakes, companies lowered payroll numbers midway through 2021. The fall in employment was for the seventh consecutive month and the fastest over this period, the release said. While the decline in jobs was widespread, it was led by consumer services.

Also read: CMIE Survey Limitations May Bias Unemployment Data, Says Pronab Sen

The June data pointed to signs of spare capacity among service providers, as outstanding business decreased for the first time in over a year, according to the statement. The overall rate of backlog depletion, however, was marginal.

Firms reported that higher transportation and material costs continued to push-up average input prices. The rate of inflation was at a five-month low, but outpaced its long-run average. Companies continued to share rising cost burdens with clients by lifting their selling prices in June.

The overall level of business sentiment was down for the third month in a row in June, reaching its lowest since last August because of the pandemic’s reemergence.

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