India's services activity accelerates in August, but growth remains near 4-year low: PMI

India's services sector activity accelerated in August, supported by stronger output and new business, even as the pace of expansion remained among the weakest in more than four years, according to the HSBC India Services PMI survey released on Thursday.

The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 54.1 in August from 53.3 in July.

However, the latest reading was the second-weakest since March 2022 and remained slightly below the long-run average of 54.5.

The HSBC India Services PMI Business Activity Index is based on a single question asking how the level of business activity compares with the situation the month before.

Service providers reported that demand conditions remained supportive and new business inflows strengthened during the month.

At the same time, subdued bookings, intense competition and reduced transport operations constrained growth.

"India's services activity expanded faster in August. Growth was supported by stronger output and new business, although the overall pace was still among the weakest seen in over four years, with some firms citing subdued bookings, competition and reduced transport operations," said Pranjul Bhandari, Chief India Economist at HSBC.

New export orders rose solidly at a rate broadly similar to July, with firms reporting gains from clients in Australia, Brazil, Canada, Japan, Malaysia, Singapore, Sri Lanka and the UAE.

The pace of export growth, however, remained below its average for the past year.

Service firms nevertheless continued to hire, with around 11% of survey participants reporting higher staffing levels.

"Employment increased at a marked rate, with job creation reaching a 15-month high. Price pressures picked up only modestly: input cost inflation edged up slightly, while prices charged rose at the fastest rate since March as firms passed on higher operating costs," Bhandari said.

Input cost inflation edged up only slightly and stayed moderate by historical standards, with firms reporting higher spending on digital platforms, electricity, inputs, labour, marketing and regulatory requirements.

Prices charged by service providers, however, rose at the fastest pace since March as companies passed on higher operating costs to customers.

Composite activity remains unchanged

The acceleration in services activity offset a slowdown in manufacturing, leaving overall private-sector output growth unchanged in August.

The HSBC India Composite PMI Output Index stood at 54.3 in August, the same as in July.

The reading pointed to a solid pace of expansion, but was the joint-slowest in four-and-a-half years and below the historical trend.

Total sales growth picked up from July but remained the second-weakest since February 2022.

While services firms recorded faster growth, goods producers reported a slowdown.

The wider slowdown was led by manufacturing, where activity growth slipped to a five-year low in August.

The HSBC India Manufacturing PMI fell to 52.8 from 53.5 in July, marking a third consecutive monthly decline.

In PMI surveys, a reading above 50 indicates expansion, while a score below 50 points to contraction.