Demand For Services, New Business Rise At Fastest Pace Since 2011: S&P Global PMI

June data pointed to further accelerations in growth of new business and output at Indian services companies amid ongoing improvements in demand conditions, according to survey-based S&P Global India Services Purchasing Managers Index (PMI).

Although firms expect the recovery to be sustained over the coming 12 months, concerns surrounding price pressures restricted business confidence. Input costs continued to rise at a historically elevated pace, although one that was the slowest in three months, while charge inflation hit a near five-year high.

Rising from 58.9 in May to 59.2 in June, the seasonally adjusted S&P Global India Services PMI® Business Activity Index was at its highest mark since April 2011 and signalled a steep rate of increase. Moreover, the acceleration in growth was broad-based across the four monitored sub-sectors. According to panellists, the upturn stemmed from ongoing improvements in demand following the retreat of pandemic restrictions, capacity expansion and a favourable economic environment.

Services firms noted a substantial upturn in new work intakes at the end of the first fiscal quarter, with the rate of increase improving to the best in over 11 years. Where growth was signalled, survey members commented on strengthening demand conditions, expanded client bases and fruitful marketing.

Firms were able to secure new orders despite charging more for their services. June data showed the fastest rise in selling prices since July 2017 as several companies sought to transfer part of their additional cost burdens to clients. Stronger increases in charges were seen across the four broad areas of the service economy, with the sharpest upturn recorded in Transport, Information & Communication.

Despite easing to a three-month low in June, the overall rate of input cost inflation remained elevated by historical standards as one-fifth of panellists signalled greater expenses and the remaining reported no change since May. Where a rise was reported, panellists blamed this on higher chemical, food, petrol, retail and staff costs.
Unrelenting inflation continued to concern businesses, who were cautiously optimistic about the year-ahead outlook for business activity. The overall level of sentiment was well below its long-run average as only 9% of companies forecast output growth.

Elsewhere, the latest data indicated that service providers' capacities were tested as new business growth gathered momentum. Outstanding business rose for the sixth straight month and at the fastest pace since February 2021.

Some companies responded to capacity pressures by hiring additional staff in June, but the vast majority (94%) left payroll numbers unchanged. Overall, services employment rose marginally, following a decline in May.

Growth of Indian private sector output steadied in June, as a faster increase in services activity offset a slower rise in factory production. The S&P Global India Composite PMI Output Index* was at 58.2, little-changed from 58.3 in May and indicative of a marked rate of expansion.

Aggregate new orders also increased at a marked pace that was broadly similar to May. Service providers signalled a stronger expansion than manufacturers, as growth among the former picked up to the quickest in over 11 years.

Private sector jobs rose in June, following a fractional decline in the previous month. Slight increases in employment were recorded in both the manufacturing and service sectors.