Services PMI hits one-year low in November

India's services output expanded at a slower pace in November as the sector lost further growth momentum midway through the third quarter.

The S&P Global India Services Business Activity Index hit a one-year low of 56.9 in November, falling from 58.4 in October. A reading above 50 indicates an overall increase in output.

There were softer expansions in new work intakes and output, the slowest in a year, but they were nevertheless sharp and well above their respective long-run averages.

"India's service sector has lost further growth momentum midway through the third fiscal quarter, but we continue to see robust demand for services fuelling new business intakes and output. The current rates of expansion look very healthy when considering their respective long-run averages and the outlook for business activity remains bright in spite of optimism fading due to rising inflation expectations," says Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

The overall rate of growth softened to the weakest since November last year but was sharp and above the series trend.

Data showed widespread slowdowns in rates of growth for both new orders and output across the four broad areas of the service economy. Finance and insurance topped the rankings, while real estate and business services came last.

International demand for Indian services improved further but, as for total new orders, growth lost momentum. The latest increase in new export orders was moderate and the slowest since June.

"There was some relief for service providers in India on the cost front, with the rate of input price inflation receding to the weakest in eight months. Fewer companies hiked their own fees as a result, an aspect that might provide a further boost to demand as 2023 draws to a close," says Lima.

Services firms endured a further increase in their operating expenses, with labour, food, material and transportation costs reportedly rising since October. However, the overall rate of inflation softened to an eight-month low and was below its long-run average.

"Given the lack of pressure on operating capacities signalled by stable backlog levels, services firms became more cautious when it comes to hiring. Net employment still rose in November, but the rate of job creation was marginal and the slowest in seven months," Lima adds.

Slowdown in services curbs growth of private sector output

November data signalled the weakest rise in private sector activity across India for a year. However, despite falling from 58.4 in October to 57.4, the S&P Global India Composite PMI Output Index was indicative of a substantial pace of expansion. Manufacturers outperformed service providers and noted a quicker rate of growth.

Factory orders rose to a greater extent and demand for services somewhat cooled. At the composite level, sales increased at the weakest rate since November 2022.