India's services sector growth hits 4-month high in October; input cost inflation at 6-year low

India's services sector activity expanded at its fastest pace in four months in October, supported by stronger domestic demand and new business order, according to a monthly survey released on Wednesday.

The HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 55.8 in October from 55.2 in September.

A reading above 50 indicates expansion, while a score below that level signals contraction.

The input cost inflation eased to its lowest level in more than six years.

Overall sales increased at the fastest pace since June, with all four broad segments tracked by the survey reporting quicker growth in output and new business.

Growth was led by the finance and insurance segment, while real estate and business services recorded the weakest expansion.

However, growth in international sales remained subdued. New export orders increased only marginally, recording their weakest expansion since February 2023.

Input costs rose at a negligible pace in October, the slowest since August 2020 and well below the long-term trend.

Some companies, however, reported higher expenses on electricity, labour, raw materials and transportation.

With cost pressures easing, service providers raised selling prices at a slower pace. Fewer than 3% of companies increased their charges at the beginning of the third fiscal quarter, citing the passing on of higher costs to clients.

The overall rate of inflation in prices charged by service providers was marginal and the weakest since June.

Employment growth slowed to its joint-weakest rate in the current 10-month period of job creation.

While service providers remained optimistic about output growth over the next 12 months, the level of positive sentiment fell from September and remained below its long-run average.

"Although overall demand remained fairly strong, new export orders recorded the slowest pace of expansion since February 2023," said Pranjul Bhandari, chief India economist at HSBC.

India's composite PMI, which measures activity across manufacturing and services, rose to 56.2 in October from 55.9 in September, the fastest expansion in private sector output in four months.

The survey was conducted between October 9 and 28 among around 400 companies in India's services sector.