India’s services sector recorded the best expansion in activity this May in over 11 years, as per the S&P Global Services Purchasing Managers’ Index (PMI) which moved up from 57.9 in April to 58.9 in May. A PMI reading of over 50 indicates growth in activity levels.
Business activity rose at the quickest pace since April 2011, with new orders rising at the highest rate since July 2011, even as input cost pressures surged at the fastest pace ever since the survey’s commencement in December 2005.
May marked the 23rd successive month to report rising input prices, led by higher food, fuel, labour, material, retail and transportation costs, compelling firms to raise selling prices at the second highest rate in almost five years.
Despite stronger domestic demand, service sector firms still shed jobs in May, as global orders fell for the 26 th month in a row since the COVID-19 lockdowns of March 2020, and sentiment remained low amid concerns about inflation denting the recovery.
Within services, consumer services was the brightest spot even though it also faced the highest surge in input costs. Transport, information and communication services firms passed on higher costs to buyers at the fastest pace.
“The reopening of the Indian economy continued to help lift growth in the service sector [but] the inflation outlook appeared to have worsened as input prices rose at the sharpest pace in the survey history,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
Ms. De Lima noted that output charge inflation softened only marginally from April, being the second-highest in just under five years, as several companies mentioned the need to transfer mounting costs through to clients.
“Elevated price pressures continued to restrict business optimism. Despite picking up from April, the overall level of sentiment among service providers was historically subdued,” she concluded. The S&P Global India Composite PMI Output Index, which factors in both services and manufacturing sectors’ performance, rose to 58.3 in May from 57.6 in April, marking the fastest rate of expansion since last November.
“…Aggregate cost burdens rose at the fastest rate since March 2011. By comparison, there was a mild slowdown in cost inflation in the manufacturing industry. Concurrently, output charges at the composite level rose further, with the overall rate of inflation little-changed from April’s nine-year high,” S&P Global said in a note.
