India’s services growth cools to 5-month low in October, price pressures ease: PMI

Growth in India’s services sector softened in October as heavy rains and intense competition slowed business activity, even as easing price pressures offered some respite to firms, a monthly business survey showed on Thursday.

The seasonally adjusted HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 58.9 in October from 60.9 in September, the slowest pace of expansion since May.

However, it remained well above the 50 threshold that separates growth from contraction and higher than its long-run average of 54.3.

“India’s services PMI softened to 58.9 in October, which represented the slowest pace of expansion since May. Competitive pressures and heavy rains were cited as contributors to the sequential slowdown,” said Pranjul Bhandari, Chief India Economist at HSBC. “That said, the services PMI is still running well above the neutral level of 50.0 and its long-run average.”

Firms reported strong demand and a boost from GST relief measures, but noted that competition and weather disruptions constrained growth.

New business inflows continued to expand sharply but at the weakest pace in five months, as some firms pointed to heightened competition and disruptions caused by floods and landslides.

International sales also rose, though the rate of expansion was the slowest since March.

Input cost inflation eased to a 14-month low, and output charges rose at the slowest pace in seven months, suggesting that price pressures across the sector are receding.

Fewer than 5% of firms reported higher selling prices during the month, according to the survey.

Employment increased marginally in October, the joint-softest pace in 18 months, as firms sought to support business inflows and maintain service quality.

The backlog of work fell marginally, the first decline in nearly four years, as firms managed workloads more effectively.

Meanwhile, the HSBC India Composite PMI, which combines manufacturing and services activity, dropped to 60.4 in October from 61.0 in September. The moderation was driven mainly by services.