India's Services PMI Rises To 55.8 In October, Signals Fastest Growth In Four Months

New Delhi, Nov 4 (KNN) India's services sector expanded at its fastest pace in four months in October, driven by stronger domestic demand and rising new business, although employment and export orders remained subdued.

The seasonally adjusted HSBC India Services PMI Business Activity Index increased to 55.8 in October from 55.2 in September, staying above the neutral mark of 50 and its long-run average.

Growth in new business drove higher output, with overall sales rising at their fastest pace since June. Survey respondents attributed the increase to favourable demand conditions, new client wins and successful advertising campaigns.

All four broad service categories recorded faster growth in output and new business. Finance and Insurance led both segments, while Real Estate and Business Services posted the slowest expansions.

Domestic demand drives services growth

Domestic demand remained the key driver of new business in October, while international sales recorded marginal growth, the weakest since February 2023.

HSBC Chief India Economist Pranjul Bhandari said the Services PMI reached a four-month high amid improving business conditions, although export orders grew at their slowest pace since February 2023.

She added that employment growth had moderated, suggesting some service sector firms had sufficient capacity to meet current staffing needs.

Input cost inflation eases to six-year low

Input cost inflation in the services sector eased to its lowest level since August 2020, with the rate of increase remaining negligible and below its long-run trend.

Some firms reported higher spending on electricity, labour, raw materials and transportation. Cost pressures were strongest in Consumer Services, the only segment to record a faster rise in input prices than in September. Finance and Insurance saw the slowest increase.

Service providers also raised selling prices at a slower pace, with fewer than 3 per cent of firms increasing charges to pass on higher costs. Overall output price inflation remained marginal and fell to its weakest level since June.

Employment growth and business confidence moderate

Services firms continued to clear outstanding workloads, with unfinished business declining for the third time in four months.

Employment growth also slowed in October, with job creation reaching a joint 10-month low and remaining marginal overall.

Companies remained optimistic about output growth over the next 12 months, although positive sentiment declined during October and stayed below its long-run average.

Composite PMI records four-month high

The HSBC India Composite PMI Output Index, which measures manufacturing and services activity, rose to 56.2 in October from 55.9 in September, signalling the fastest expansion in overall output in four months.

Composite new business also recorded its strongest growth since June. However, job creation slowed and business confidence weakened from September.

Cost pressures eased across both sectors, taking overall input cost inflation to an 11-month low. Selling price inflation for goods and services also moderated to its weakest level since February 2022.

The survey indicated that inflationary pressures remained lower in services than in manufacturing.

(KNN Bureau)