Feb. services sector growth slows

Purchasing Managers’ Index (PMI) signals fractional job creation that was weakest in 21 months; Services PMI contradicts the signals put out by the HSBC India Flash PMI for last month, which is based on early responses from surveyed firms

For India’s services sector, growth in new orders and output slowed in February, denting business confidence levels and resulting in only a fractional uptick in employment that was the slowest in 21 months, as per the HSBC India Services Purchasing Managers’ Index (PMI).

The seasonallyadjusted PMI print for services eased to 60.6 in February from 61.8 in January. A reading of over 50 on the index indicates growth in activity levels. Surveyed firms reported the secondweakest input cost pressures since August 2020 and raised prices at the mildest pace in two years.

The services PMI contradicts the signals put out by the HSBC India Flash PMI for last month, which is based on early responses from surveyed firms. For services, the Flash PMI had indicated that output rose at a sevenmonth high pace and fresh contracts surged at the fastest rate in a decade in February.

“India’s services PMI suggests... the pace of expansion in the services sector eased in February from January,” HSBC economist Ines Lam wrote. “Due to a slowdown in growth in new orders and output, services companies’ outlook for future business activity, while remaining strongly positive, weakened slightly,” she added.

The index ascertains business confidence levels on the basis of firms’ outlook for the year ahead. Around 26% of companies foresee growth and 2% anticipate a fall, as of February.

On the bright side, new business from abroad rose for the thirteenth month in a row, and at a pace that was among the best in nine and a half years.

Taken together with the manufacturing sector’s performance last month, with its PMI rising to 56.9, from 56.5 in January, overall private sector output in India decelerated in February. The HSBC India Composite PMI Output Index slipped from a sixmonth high of 61.2 in January to 60.6, as per a note on last month’s index.

“Rates of expansion were broadly similar at manufacturers and services firms, though the former registered an acceleration and the latter a slowdown,” HSBC explained.