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03/08/2018 01:13pm

India’s Services PMI rose to 54.2 in July; shows 2nd straight month of growth and fastest since October 2016

image India’s Services PMI rose to 54.2 in July; shows 2nd straight month of growth and fastest since October 2016

New Delhi, Aug 3 (KNN) The Nikkei India Services PMI rose to 54.2 in July, 2018 from 52.6 in the previous month. It was the second straight month of growth in the services sector and the fastest since October 2016.

In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

New orders grew the most since June 2017, employment went up at the strongest rate since April and sentiment towards the 12-month outlook picked up from June’s recent low.

On the price front, input costs rose for the 21st consecutive month, which was the fastest since March. Still, firms were unable to fully pass on greater cost burdens to price-sensitive clients.

"July data was encouraging as the service sector observed the best performance since October 2016, underpinned by the strongest gain in new orders since June 2017," said Aashna Dodhia, Economist at IHS Markit, and author of the report.

Amid reports of improved demand conditions, business confidence towards the 12-month outlook picked up from June's recent low. Subsequently, firms raised their staffing levels at the strongest pace since April.

Meanwhile, the headline seasonally adjusted Nikkei India Composite PMI Output Index, that maps both the manufacturing and services sector, rose from 53.3 in June to 54.1 in July.

"Marked expansions in both the manufacturing and service sector, with stronger growth in the latter, powered the fastest improvement in overall operating conditions in the economy since October 2016," Dodhia, said.

On the prices front, inflationary pressures remained marked during July.

"There are some warning signs reflected by PMI price data. Although overall input cost inflation softened from June's near four-year high, service companies faced the fastest rise in input costs since March amid reports of high oil prices," Dodhia said.

On the Reserve Bank's policy stance, Dodhia said, "Indeed, an uncertain global climate, currency weakness and strong inflation may continue to place pressure on the central bank to hike interest rates over the coming months".

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