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August saw a recovery in the services sector, which added the most jobs in 14 years

Rate of growth was stronger in the sectors of transport, information, and communication, with finance and insurance

According to the S&P Global India Services PMI, business sentiment in India has improved to its highest level since May 2018.

According to the S&P Global India Services Purchase Managers’ Index (PMI), which increased from 55.5 in July to 57.2 last month, the services sector in India recovered in August after hitting a four-month low in July and added the most jobs in 14 years at the slowest rate in 11 months. A PMI score of 50 implies no change in the level of business activity.

While the volume of new business for services firms climbed significantly from July, the rate of growth was stronger in the sectors of transport, information, and communication, with finance and insurance outperforming all other subsectors.

Highest level of optimism since 2018

The S&P Global poll of services firms found that their expectations for production levels a year from now have been revised upward due to the stronger growth and slower input cost performance in August. This has increased overall optimism to the highest level since May 2018.

Only 5% of businesses anticipated output growth in the coming year, down from 9% in June, when the PMI index reached an 11-year high of 59.2, according to the July PMI survey.

According to Ms. Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, transportation, information, and communication services experienced the fastest increase in selling prices while consumer services experienced the highest input cost inflation.

She added that the rate at which service providers passed on higher costs to customers was generally similar to July. “With demand showing considerable resilience, service providers maintained a degree of pricing power and lifted selling prices amid the transfer of cost increases to customers,” she noted.

Firms raised selling prices in August as a result of having to raise prices to safeguard their margins from cost pressures. Some firms indicated that their price revisions were supported by “accommodative demand conditions,” which means that customers were willing to pay higher prices.

In August, Indian service organisations’ outstanding business volumes increased at their quickest rate in 18 months, bringing the current sequence of accumulation to eight months.

Increase in the Composite PMI Output Index

The S&P Global India Composite PMI Output Index increased from 56.6 to 58.2 as a result of the manufacturing PMI exhibiting robust rise in new orders and output during August as well. In August, the rate of inflation faced by businesses in the industrial and service sectors as a whole reached a 19-month low.

“New work intakes increased at quicker rates in the manufacturing and service sectors, leading to the fastest upturn at the composite level for nine months. Indian private sector jobs expanded to the greatest extent in over 14 years… driven by a substantial acceleration in growth across the service economy, while manufacturers registered a broad stabilisation of payroll numbers,” S&P Global said.

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