HSBC India Services PMI Business Activity Index stood at 51.1 in December 2014 down from 52.6 in November 2014
At 51.1, down from 52.6, the seasonally adjusted HSBC India Services PMI Business Activity Index – a single question tracking changes in activity at Indian services companies on a month-by-month basis – was indicative of a moderate expansion in business activity in December. Despite slowing since November, the rise remained stronger than the average observed for 2014. Anecdotal evidence linked rises in service sector output to improvements in demand. ‘Other Services' was the best performing of the six monitored sub-sectors, while the sharpest contraction occurred in Financial Intermediation.
The overall slowdown in activity growth was mirrored by a weaker expansion in service sector new business in December. The latest increase was the eighth in as many months and moderate overall. Across the private sector as a whole, growth of new work inflows remained solid, led by a further acceleration at manufacturers.
Staffing levels in the Indian service sector increased in December, reversing the trend recorded in the previous month. However, with the vast majority of surveyed firms reporting no change in employment, the pace of expansion was modest overall. The rise in service sector payroll numbers more than offset a contraction at goods producers, as employment rose across the private sector overall.
Volumes of outstanding business at Indian service providers continued to rise in December, as has been the case in nine of the past ten months. That said, the rate of backlog accumulation slowed to the weakest in three months and was marginal overall. Growth of backlogs also eased across the private sector as a whole.
Following the first monthly fall in more than five-and-a-half years in November, input costs faced by Indian services firms rose in December. However, the rate of cost inflation was only modest overall and mild in the context of historic survey data. Meanwhile, cost pressures in the manufacturing industry eased to the weakest in the current 69-month sequence of inflation.
Consequently, private sector input costs rose at a historically muted pace.
Average tariffs charged by services firms increased in December, following a reduction in the previous month. The rate of charge inflation was fractional overall, reflecting relatively muted cost pressures. Overall, private sector output prices also rose at the weakest pace since October 2010.
Business confidence strengthened in December, despite slowdowns in growth of activity and new orders. The degree of positive sentiment among Indian service providers was robust overall, albeit weak in comparison with the long-run series average.
Commenting on the India Services PMI survey, Pranjul Bhandari, Chief India Economist at HSBC said: “Both activity and new orders in India's services sector expanded in December, though at lower rates compared with November. All but the Financial Intermediation sub-sector saw an expansion in order books. In our view, growth in Financial Intermediation is key for funding a meaningful pick-up in economic growth. Meanwhile, business expectations grew quickly, led by the Hotels and Restaurants sub-sector. Inflationary pressures from both input and output prices remained modest."
