Activity in India’s dominant services sector climbed to the highest level in 12 years, aided by new business orders and moderation in cost pressures amid resilient demand in the economy.
(Bloomberg) — Activity in India’s dominant services sector climbed to the highest level in 12 years, aided by new business orders and moderation in cost pressures amid resilient demand in the economy.
The S&P Global India Purchasing Managers Index for services rose to 59.4 in February from 57.2 in the previous month, according to a statement Friday. A number above 50 shows expansion, while a print below that shows contraction in activity. The gains helped take the composite index to 59 from 57.5 in January.
“The service sector more than regained the growth momentum lost in January,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. “Despite the strong upturn in new business intakes, service providers noted only mild pressure on their capacities.”
The highest reading since February 2011 provides some relief after gross domestic product growth slowed in the three months to December as manufacturing contracted and services activity moderated. Slowing exports amid waning global demand and faltering consumption due to rising interest rates may further impede recovery in Asia’s third-largest economy.
What Bloomberg Economics Says…
The surge in India’s services PMI further into expansion to a 12-year high in February offers a counterpoint to a string of weak data and suggests the recovery still has momentum in a key area of the economy. For the Reserve Bank of India, it likely adds to the case to tighten further to temper elevated core inflation. We see another hike coming in April.
— Abhishek Gupta, India economist
For the full note, click here
Cost pressures eased as input prices increased at the slowest pace in nearly two-and-a-half years, and as a result most firms left payroll numbers unchanged. However, the overall level of positive sentiment for the year-ahead remained below its long-run average, as some companies were concerned about competitive pressures.
“It seems that hiring growth was also dampened by a lack of confidence in the business environment,” said De Lima. “The degree of optimism recorded in February was the lowest for seven months and below the historical trend as some companies doubted demand would remain this resilient.”
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