Services PMI Remains Buoyant Even As Rising Costs Push Up Inflation

Growth in Services PMI and Composite PMI remained buoyant despite a fractional decline a month ago.

The seasonally adjusted HSBC India Services Business Activity Index was at 60.3 in July, down only fractionally from 60.5 in June and above the neutral mark of 50.0 for the thirty-sixth straight month, according to a press release by S&P Global on Monday.

The HSBC India Composite Output Index posted 60.7 in July, down only fractionally from 60.9 in June

The rise in output reflected a sustained increase in sales volumes in July, with survey participants particularly commenting on buoyant demand, tech investment and a growing online presence. Total new orders expanded at a historically sharp pace. New export orders increased at the third-strongest pace since the inception of the series in September 2014, amid strengthening demand for Indian services from across the world. Some of the sources of rising export orders mentioned by panellists included Austria, Brazil, China, Japan, Singapore, the Netherlands and US.

Meanwhile, a pick-up in cost pressures and stronger pipelines of new business encouraged panellists to hike their selling prices again in July. The overall rate of charge inflation climbed to a seven-year high, led by labour and materials.

Favourable economic conditions and optimistic expectations for output supported recruitment among services firms. The latest rise in employment levels was among the strongest in close to two years. Job creation was achieved via the hiring of full- and part-time staff, anecdotal evidence showed.

Looking ahead, services firms remained strongly optimistic about growth prospects. Anecdotal evidence suggested that confidence in the outlook for demand and sales, alongside improved customer engagement and new enquiries, boosted optimism.