Indian services PMI rises first time in seven months to 52.2 in May

Key Highlights:

• Services PMI rose for first time since October 2016 to 52.2 in May.
• Service providers took on extra staff in May and business sentiment blossomed.
• GDP could expand at a faster rate if growth momentum is maintained in June.

The services sector Purchasing Manager’s Index (PMI) rose to 52.2 in May as compared to 50.2 in April, Japanese stock index Nikkei said on Monday.

“The Indian service sector recovered some recent lost ground, with a quicker rise in new business inflows boosting growth of both activity and employment during May,” the report said.

In October last year the services PMI recorded an upbeat score of 54.5. Post which demonetisation hit and the index contracted in November to 46.7.

However this has picked up again on the back of strong upturn in services and new work across the sector.

“Service providers took on extra staff in May in order to cope with greater workloads. Although modest overall, the rate of jobs growth accelerated to the fastest in almost four years. Factory jobs, on the other hand, fell in the latest month,” the report said.

However despite the acceleration from April PMI service rates the report said that the rates of increase in service activity and new work was still low.

“Input costs and output charges increased at softer rates that were broadly negligible in the context of historical PMI data. Meanwhile, business sentiment weakened on the back of growing concerns regarding competitive pressures,” the report added.

Commenting on the Indian Services PMI survey data, Pollyanna De Lima, economist at IHS Markit, and author of the report, said, “The pick-up in service sector growth seen mid-way through the first quarter (FY) suggests that GDP could expand at a faster rate should growth momentum be maintained in June, though there are downside perils to this.”