Services activity hits 5-month high despite inflation
Activity in India’s services sector recovered to a five-month high in April, signalling a strong rebound in orders as pandemic-related disruptions in Asia’s third-largest economy eased, a survey showed on Thursday.
The S&P Global Purchasing Managers’ Index (PMI) for services rose to 57.9 points in April from 53.6 points in March as firms recorded the fastest growth in sales and business activity since November. However, companies reported intensified inflationary pressures because of the Russia-Ukraine war. Service providers passed on the higher costs to consumers by increasing prices in April by the most in close to five years. The survey showed that inflationary concerns dampened business confidence in April, which slipped from the March levels and was much lower than its long-run average.
The 50-point mark separates expansion from contraction. However, the PMI is a monthover-month indicator, showing improvement over the previous month and not over the previous year.
Service providers reported soaring operating expenses, having to bear higher costs for chemicals, food, fuel, labour, material, and retail.
“The latest results showed a resurgence in price pressures during April. Service providers reported having paid more for food, fuel, and material, with some mentions of higher wage costs also pushing up overall expenses. The overall rate of inflation quickened to the secthe
ond-highest in the survey history, leading companies to hike their selling prices to the greatest extent in close to five years,” said Pollyanna De Lima, economics associate director at S&P Global. Having accelerated from March, the overall rate of inflation was sharp and the second-strongest since data collection started in December 2005, the report showed. Nevertheless, new business inflows expanded further in April, taking the current sequence of growth to nine months. Survey participants suggested that the lifting of covid-19 restrictions led to greater consumer footfall and a general improvement in demand.
“In isolation, the PMI data for the services sector was mostly encouraging, as surging demand underpinned quicker increases in new business inflows and output. Employment rose for the first time in five months,” De Lima said.
Companies resumed their hiring in April, as seen by the first increase in employment since last November.