Service activity shows upturn as PMI rises to 57.2 in Aug

The S&P Global India Services Purchasing Managers' Index (PMI) showed an upturn to 57.2 in August 2022 from 55.5 in July 2022 on stronger gains in new businesses, ongoing improvements in demand, job creation and overtime work. The service sector expanded for the 13th month in a row. A reading above 50 shows expansion and below 50 indicates contraction in the economic activity.

The S&P Global India Services PMI report shows Indian service providers welcomed a stronger expansion in new work intakes, with a quicker upturn in business activity and the sharpest rise in employment for over 14 years.

Forecasts regarding the year-ahead outlook for output were revised higher, with optimism at its greatest degree since May 2018. Complementing the uptick in growth was a slower increase in input costs during August, shows the data.

"Indian services activity rose strongly midway through the second fiscal quarter, with the pace of expansion recovering some of the ground lost in July. The pick-up in growth stemmed from a rebound in new business gains as firms continued to benefit from the lifting of COVID-19 restrictions and ongoing marketing efforts," says Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

Amid reports of favourable demand conditions and successful advertising, there was a further increase in new business placed with services firms during August. The rate of expansion was sharp and quickened from July, shows the data.

Services companies expect output growth over the coming 12 months, with sentiment rising to its highest level in over four years. Optimism was centred on forecasts of ongoing improvements in demand and planned marketing.

Strong sales coupled with upbeat growth projections underpinned a substantial increase in jobs across the service sector, and the rate of job creation picked up to the strongest in over 14 years.

The August data also highlighted another increase in the operating expenses faced by services companies, with panellists often mentioning higher food, fuel and labour costs. That said, the overall rate of inflation softened to an 11-month low.

The aggregate output growth in India recovered from July's slowdown as both manufacturers and service providers noted quicker rates of increase in August.

The S&P Global India Composite PMI Output Index rose from 56.6 to 58.2 in August, indicating a sharp pace of expansion. New work intakes increased at quicker rates in the manufacturing and service sectors, leading to the fastest upturn at the composite level for nine months.

Indian private sector jobs expanded to the greatest extent in over 14 years midway through the second fiscal quarter. The upturn was driven by a substantial acceleration in growth across the service economy, while manufacturers registered a broad stabilisation of payroll numbers, shows the S&P data.

There was also a softer increase in operating expenses facing private sector companies. The rate of inflation retreated to a 19-month low in August. On the other hand, selling prices rose at a slightly quicker rate in August, though one that was well below that seen for cost burdens.