Following the path taken by manufacturing, the services sector also signalled strong growth in October, private survey results released on Wednesday showed. The results, better known as Purchasing Managers’ Index (PMI), rose to 58.5 in October, as against 57.7 in September, which was a 10-month low. At the same time job creation was the quickest in 26 months.
Earlier, with a pick-up in festival demand, Manufacturing PMI rose to 57.5 in October, as against an eight-month low of 56.5 in September. Services has an over 53 per cent share in Gross Value Added (GVA), while manufacturing contributes nearly 15 per cent. This means over two-thirds of the economy is doing well and this should reflect in the GDP (Gross Domestic Products) number in the October-December quarter (Q3) of Fiscal Year 2024-25, whose date will be made public February next year.
In more good news, job creation in both the sectors was good. Indices for both the sectors is created on the basis of the response from purchasing managers of 400 companies each. An index of 50 reflects expansion, while a figure below 50 means contraction.
Talking about services PMI, Pranjul Bhandari, Chief India Economist at HSBC, said: “During October, the Indian services sector experienced strong expansion in output and consumer demand, as well as job creation, which achieved a 26-month high.” The report accompanying PMI highlighted that October saw a marked expansion in services employment, one that was the quickest for 26 months. Around 13 per cent of panellists reported job creation, compared to 9 per cent in September. Anecdotal evidence showed that a sustained improvement in new business has induced firms to hire full- and
“Although input price inflation is accelerating from higher food and wage costs, the general inflation trajectory remains below the long-run average. Underlying data indicated that capacity pressures also boosted job creation,” the report said.
Talking about price pressure in the services sector, the report said input price inflation accelerated to a three-month high in October, with services companies mainly reporting greater food and wage costs. The overall rate of inflation remained below its long-run average, however. Out of the four monitored sub-sectors, cost pressures were highest in Consumer Services. Companies shared part of their additional cost burdens with clients by continuing to lift selling prices. The rate of charge inflation picked up to the strongest since July and outpaced the series trend. The Finance and Insurance segment again registered the strongest upturn.
“Although input price inflation is accelerating from higher food and wage costs, the general inflation trajectory remains below the long-run average,” Bhandari said.
On sentiment, the report mentioned that it remained positive in October, despite receding a little from September. Exactly one-quarter of the survey panel forecast higher output volumes over the coming year, linked to healthy demand trends, marketing efforts and new client enquiries. At the same time, 74 per cent of firms foresee no change in business activity from present levels. “Future activity index still indicates broadly positive expectations for the year ahead,” Bhandari concluded.
