Services Sector Logs Slowest Growth In 4 Months On Weak Sales And Inflation

As per the S&P Global India Services PMI Business Activity index, the country's services sector logged a downfall from 59.2 in June to 55.5 in July. This is the slowest rate of growth in the space in four months. Nonetheless, the reading is still above the 50-mark that separates growth from contraction and also is more than the long-term average.

The latest survey points that the upturn in the service space was hampered given the weak sales growth as well as inflationary pressure.

"Falling from 59.2 in June - the highest figure in over 11 years - the latest reading indicated the slowest rate of growth in four months. Companies that signalled higher business activity mentioned ongoing improvements in sales, the offering of new services and workers taking on overtime. The rise was reportedly curbed by price pressures and US dollar strength," the report mentioned.

The marketing efforts that supported increase in new work orders were offset by unfavourable weather as well as competitive pressure that weighed on demand.

"There were many positives in the latest results. Business activity continued to rise strongly, with a similarly robust uplift in new business as the offering of new services and marketing efforts bore fruit," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

"There was, however, a noticeable loss of momentum for the Indian service economy as demand was somewhat curtailed by competitive pressures, elevated inflation and unfavourable weather," he added.

Composite PMI

The composite PMI for July also fell to 56.6 from 58.2 in June, logging the slowest growth since March.

"Manufacturing led the upturn with the quickest rise in production since last November, while growth of services activity eased to the weakest in four months. Similarly, new business growth picked up in the manufacturing industry whilst slowing in the service economy. At the composite level, sales increased sharply but at the weakest pace in four months," it said.

Aggregate employment also rose only marginally in July, with expansion rates mostly alike for goods producers and service providers. "At the composite level, purchase prices and selling charges rose at the slowest rates since February and March respectively," it said.