Services PMI Grows At The Fastest Pace In Over A Decade

A gauge of India’s services sector grew at the fastest pace since July 2011.

The India Services Business Activity Index, compiled by IHS Markit, stood at 58.4 in October compared with 55.2 in September, according to a media statement. That "signaled the strongest rate of growth in ten-and-a-half years". It's also the third straight month of expansion.

A reading above 50 indicates expansion in business activity.

The Composite PMI rose to 58.7 from 55.3 in September, signalling the strongest monthly expansion since January 2012.

New work intakes increased at the strongest rate since July 2011. Survey participants commonly linked sales growth to better underlying demand and successful marketing.

Output prices rose at the strongest rate since July 2017. October data highlighted the sixteenth successive monthly increase in input costs at Indian services. Anecdotal evidence suggested that additional cost burdens were passed on to clients. The rate of inflation was at a six-month high and outpaced its long-run average. Monitored companies cited higher fuel, material, retail, staff and transport costs.

Although moderate, the pace of job creation quickened from September to the strongest since February 2020.

Companies were able to clear their backlogs of work. Outstanding business decreased for the third month in a row during October, albeit slightly. New export business, too, fell in October, but the rate of contraction was the weakest since March.

Although service providers were confident that business activity would increase over the course of the coming 12 months, the overall level of sentiment was little changed from September and well below its long-run average. Some firms expect sales and output to increase as the pandemic recedes and marketing efforts bear fruit, but others were concerned about the impact of inflationary pressures on the recovery.