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Manufacturing levels in India’s private sector may have slumped to a 12-month low in December, but Services activity regained momentum last month after a mild moderation in November as new orders and output levels hit a four-month high, as aper a private survey-based gauge.
The seasonally adjusted HSBC India Services Business Activity Index — based on a single question asking how the level of business activity compares with the situation the month before — rose from 58.4 in November to 59.3 in December. A reading of over 50 on the index indicates an expansion.
Within the services sectors, Finance & Insurance again registered by far the strongest increases in both new orders and business activity, the survey of 400-odd firms’ purchasing managers conducted by S&P Global showed.
After reporting a 15-month peak surge in input costs during November, services players reported a milder uptick in costs, although spending on food, labour and materials did rise further. Firms also eased the pace at which they hiked charges for customers, after raising prices at the fastest pace in nearly 12 years during November.
However, December’s price hikes were above the long-run average. While cost pressures increased at the highest pace for consumer services firms, price hikes were highest in the transport, information and communication category, S&P Global noted.
Capacity pressures seem to be building up for some firms, as the rate of backlog accumulation quickened to a seven-month high, and companies continued to hire to keep up, although the rate of hiring slowed November’s ‘unprecedented’ uptick in permanent and temporary staffers’ hiring.
While international orders continued to rise, their growth retreated to a three-month low. Moreover, despite the improved trend in December, optimism among services players fell from November’s six-month high mark. But overall, service providers remained confident of output rising over the coming 12 months.
“Forward-looking indicators such as new business and future activity suggested that the strong performance will likely continue in the near future. The easing of input price inflation in the month also supported business sentiment,” said HSBC economist Ines Lam.
Ms. Lam also pointed out the contrast in the services index reading “with the growing signs of a slowdown in the manufacturing industry.” The stronger services performance, in fact, lifted the growth in aggregate output levels of industry.
“Private sector companies in India posted a faster increase in output at the end of the calendar year. At 59.2 in December, up from 58.6 in November, the HSBC India Composite Output Index signalled the strongest rise for four months,” S&P Global said.
The increase in new business at services firms more than offset a fractional slowdown at goods producers, taking overall sales higher. Input cost inflation across the private sector economy eased during December. There was also a slower increase in prices charged for goods and services, the surveys revealed.
Published – January 06, 2025 11:17 am IST
