Services activity expands at strongest rate in over 11 years
S&P Global PMI for services rose to the highest level since April 2011 to 58.9
BENGALURU: Activity in India’s crucial services sector rose to an 11-year high in May as business orders surged and demand continued to recover following the reopening of the covid-hit economy, according to a private survey.
The data reinforces the strong economic revival trend visible in robust goods and services tax collections, strong auto sales and manufacturing activity.
The S&P Global Purchasing Managers’ Index (PMI) for services rose to the highest level since April 2011 to 58.9 in May, compared with 57.9 in April with consumer services reporting the sharpest increase in new orders.
However, intensified inflationary pressures impacted business optimism and service companies continued to pass on the spike in input costs to consumers by increasing prices. Businesses were concerned that inflationary pressures could dampen the economic recovery.
“The reopening of the Indian economy continued to help lift growth in the service sector. Business activity rose at the quickest pace in over 11 years in May…that said, the inflation outlook appeared to have worsened as input prices rose at the sharpest pace in the survey history,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
May recorded the twentythird successive month of rising input prices at Indian service providers. The rate of inflation climbed to the highest in 16-and-a-half years of data collection, said the report.
Service providers, who contributed more than 50% to India’s gross domestic product (GDP) in the first half of FY22, reported soaring operating expenses, having to bear higher costs for food, fuel, labour, material, retail, and transportation.
The PMI is a month-overmonth indicator and the 50-point mark separates expansion from contraction.
According to the report, inflation showed no signs of abating as price gauges showed an unprecedented increase in input costs and the second-fastest upturn in selling charges in just under five years.
Nevertheless, the upturn in output reflected better underlying demand and strong inflows of new work. The increase in growth of new business was the quickest since July 2011. There was a further increase in outstanding business among services firms during May, the survey based report pointed out.
While the consumer services sector, comprising contact services, recorded the sharpest growth in new orders and business activity, it also reported the highest rate of input cost inflation. The fastest increase in output charges was seen in transport, and information & communication companies. The S&P Global Composite PMI Output Index, comprising both services and manufacturing findings, rose from 57.6 in April to 58.3 in May, the fastest since November last year.