Services grow for 2nd straight month

While the activity in the manufacturing sector slackened in October, the services sector registered growth for the second consecutive month due to a surge in new work orders.

The Nikkei India services PMI rose to 51.7 in October from 50.7 in September. The service sector’s recovery following the implementation of GST gathered pace as the sector observed a faster rise in activity, underpinned by greater inflows of new business. Increased capacity pressures led to firms raising staffing levels for the second month in succession, the survey said.

The Nikkei India manufacturing PMI released on Wednesday showed stagnation in activity as the index slipped to 50.3 in October from 51.2 recorded in September 2017 as the implementation of the GST impacted demand and new work orders.

As a result, the composite output index comprising service and manufacturing sector rose slightly from 51.1 in September to 51.3 in October.

In response to greater output requirements, service providers raised their staffing levels for the second month in succession. However, it noted that the rate of job creation slowed from the preceding month.

According to the survey, the service providers remained optimistic towards the 12-month outlook for output, despite levels of confidence dipping to the weakest since June.

The rate of input cost inflation in the service sector intensified to a fastest pace since April 2016, which forced them to raise their output prices. At the sector level, the sharpest rise in input prices was noted in consumer services, followed by real estate & business services.

The backlogs, which rose for the 17th month in succession, was the highest since 2005. The service providers attributed it to the delays caused by the implementation of GST.

“The recovery from the implementation of the GST in July was sustained in the private sector in October, mainly radiating from service providers, as growth in manufacturing was relatively subdued,” said Aashna Dodhia, economist at IHS Markit.

The recovery from the implementation of the Goods and Services Tax in July was sustained in the private sector in October, mainly radiating from service providers, as growth in manufacturing was relatively subdued — AASHNA DODHIA, ECONOMIST, IHS MARKIT