The services sector expanded for the 11th month in a row in May but at a slower pace than the previous month, according to a survey.
The private sector Services Purchasing Managers’ Index compiled by Markit showed that the services sector registered a reading of 51 in May from 53.7 in April. A reading above 50 shows expansion while one below 50 implies a contraction.
“The services PMI signalled an expansion for the 11th month in a row but carried on the weakening trend evident in the manufacturing PMI numbers,” Rishi Shah, economist at Deloitte said. “The latest print exhibits a dip in confidence amongst service providers, which if persists, can be a concern.”
The Manufacturing PMI, released earlier in the week, showed that while the manufacturing sector saw a pickup in activity in May, the improvement was marginal.
“As such, this could possibly be a one off and we would wait for further indications of weakness before coming to a conclusion on the state of the service sector,” he added. “Growth of new work at services firms eased for the second month running in May,” the Markit report said.
“Where new business inflows expanded, panellists reported aggressive marketing campaigns. Nonetheless, there were mentions that growth was restricted by increased competition and the assembly elections in some regions.”
Unfinished businessThe report also said that there was ongoing evidence of spare capacity in the service sector, as unfinished business declined for the fourth successive month.
“The latest PMI numbers raise doubts about the effectiveness of economic and monetary policies,” Pollyanna De Lima, economist at Markit said.
“The gloomy growth picture will be a concern to policymakers and will raise the chances of further cuts to interest rates by the RBI (Reserve Bank of India).
