Services sector activity moderates in January on softer sales, output

NEW DELHI: Activity in India’s services sector moderated slightly in January compared to the previous month largely due to a softening of sales and output, a private survey showed on Friday. The influx of new business continued at the beginning of the calendar year, largely led by domestic market demand as international orders decreased marginally amid demand slowdown in advanced economies.

The S&P Global Purchasing Managers’ Index (PMI) for services moderated to 57.2 in January from a six-month high of 58.5 in December, marking the 18th straight month of expansion. It was aided by input cost inflation easing to a two-year low. A reading over 50 denotes expansion.

“As seen earlier in the week from the manufacturing PMI results, growth across the service sector lost some momentum at the start of the year. Yet, the survey showed us that service providers received high amounts of new business which helped keep the overall rate of growth historically prominent. Demand resilience, in turn, meant that output also continued to expand at a generally strong pace,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

Services firms posted rise in backlogs but employment levels remained largely unchanged. It could be attributed to subdued confidence about outlook. The overall level of positive sentiment fell to a six-month low as the vast majority of panellists (80%) forecast status quo in activity from the current levels, the report noted.

“The latest results highlighted some caution among service providers, partly evidenced from the vast majority of firms predicting no change in output from present levels. This somewhat subdued level of confidence towards the outlook appeared to have stymied job creation in January,” said De Lima.

However, favourable economic conditions, accommodative demand and marketing efforts supported sales.

The Economic Survey for 2022-23 issued on Tuesday pointed out that the services sector has bright growth prospects on the back of improved performance of sectors like information technology, tourism, real estate and e-commerce, but external factors and bleak economic outlook in advanced economies could impact growth prospects.