India’s services sector rebounded in December with new business and output rising at the fastest pace in three months, as per the HSBC India Services Purchasing Managers’ Index, which rose from 56.9 in November to 59 last month. A reading of 50 on the index indicates no change in activity levels.
New services sector jobs continued to rise in December, marking the 19th straight month of fresh hiring, albeit at a slightly stronger pace than November with firms opting to recruit a mix of part-time and full-time workers.
Fresh export orders for Indian services firms grew at the slowest pace since June 2023, with demand seen from regions like Australia, Canada, Europe, the Middle East and South America.
Business optimism levels, however, improved from November levels, with the pace of rise in input costs slipping to a 40-month low. At the same time, firms continued to pass on cost burdens to their clients with output charges rising at a pace that was faster than input costs’ inflation and well above its long-run average.
With the latest reading of the PMI, the October to December 2023 quarter recorded the lowest quarterly average since the final quarter of 2022-2023. This was attributed to weaker index levels of 58.4 in October and 56.9 in November. Outstanding business volumes rose slightly in December compared to November, but this reflected the fastest uptick in four months.
“India’s services sector ended the year on a high note, with an uptick in business activity, led by a three-month high new orders index. Input costs rose at a slower pace than in November, continuing the softening trend which began in mid-2023,” said Pranjul Bhandari, chief India economist at HSBC.
The high Services PMI reading for December lifted up the overall private sector activity levels, despite manufacturing activity slipping to an 18-month low as per its sectoral PMI released on Wednesday.
“India’s private sector activity rose to a greater extent in December, reversing the slowdown seen in November. The HSBC India Composite PMI Output Index increased from 57.4 to 58.5, signalling a sharp rate of expansion that was the strongest since September,” the firm said in a statement.
The acceleration was underpinned by faster growth in the service economy, as factory production rose at the slowest pace in 14 months. At the composite level, sales expanded at the fastest rate since September.
While aggregate input costs slowed to the lowest in 40 months, services firms faced a higher rise in input costs than their manufacturing peers. The combined increase in output prices across the private sector was solid, but the second-weakest in nine months.
