Services sector gathers speed after October lull

The services sector has picked up pace in November after a brief slowdown in October, reviving hopes for overall economic growth of the country. However, rising input costs are expected to spoil the party, putting pressure on their ability to absorb the hike in prices.

HSBC's India service sector PMI (Purchase Managers' Index) for November, based on views of about 400 purchase managers, showed an uptick in business activity (53.2 vs. 49.1 in October) and new business (52.3 vs 51.0 in October).

The PMI count of 50 separates growth from contraction in the sector. Due to the bounce back in services, the composite index for both services and manufacturing activity improved further to 52.3 from 50.3 in the previous month despite the deceleration in the manufacturing sector in November.

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The index shows that the companies are able to keep up with new business, with outstanding business unchanged (50.0 vs. 49.9 in October). However, hotel, financial and business services recorded a rise in outstanding business, while the other three sub-sectors reported a fall.

Panelists in four of the six sub-sectors monitored reported stronger expansion in new business, the sharpest of which was in hotels and restaurants.

Despite the improvement in new business, panelists were far less confident about the 12-month outlook, with sentiments falling to a 33-month low and the monthly drop the sharpest since July 2010 (63.6 vs. 69.3 in November).

Employment too was nearly unchanged from the previous month (49.8 vs. 49.3 in October) following a contraction in the past few months.

Inflation pressure still remains firm. Input prices (57.6 vs. 54.5 in October) and prices charged (56.0 vs. 55.9 in October) accelerated and continue to grow above.

Courtesy: Mail Today