PMI SERVICES DECLINES TO 19-MONTH LOW

Activities in the services sector, which dominates the Indian economy, contracted in September to the lowest level in 19 months, showed the widelytracked IHS Markit purchasing managers’ index (PMI). The index fell to 48.7 in September from 52.4 in August due to subdued demand. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

Activities in the services sector, which dominates the Indian economy, contracted in September to the lowest level in 19 months, showed the widely tracked I HS Markit purchasing managers’ index (PMI).

The index fell to 48.7 in September from 52.4 i n August due to subdued demand. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

This justified the RBI’S monetary policy committee’s stance to cut the repo rate by 25 basis points (bps). In fact, the commentator on PMI had talked about the increasing room for the MPC to cut the rate, when the survey got released before the announcement by the RBI.

This is the second month in FY20 that the services sector contracted, the first being June when PMI had stood at 49.6.

All this indicated that economic growth will remain lacklustre in the second quarter of FY20, too, after it fell to over a sixyear low of 5 per cent.

According to the survey, new work intakes contracted in September, after an 18-month sequence of expansion.

Firms said subdued demand conditions, unfair pricing among competitors and economic woes affected the sector.

The data released earlier this week showed that PMI manufacturing stood at 51.4 in September, unchanged from August, and thereby posting its joint-lowest reading since May 2018.

As such, growth of the Indian private sector activity came to a halt in September, ending a one-and-a-half-year sequence of expansion.

The Composite PMI Output Index that maps the manufacturing and services sectors fell from 52.6 i n August to 49.8 in September, reflecting an outright reduction in activities.

“Private sector output in India contracted for the first time since Februar y 2018. This reflected a decline in sales, albeit fractional, which restricted employment growth,” said Pollyanna de Lima, principal economist with IHS Markit.

Private sector employment continued to rise, but the pace of expansion softened to a three-month low. Marginal increases were evident in the manufacturing and service categories.

Challenging economic conditions hampered business sentiment in September, with optimism down at goods producers and service providers alike. Aggregate confidence level fell to a 31-month low.

The index fell to 48.7 in September from 52.4 in August due to subdued demand. In PMI parlance, a print below 50 denotes contraction